When and Why you should Outsource Payroll Process and Benefits of Outsourcing Payroll

At the heart of any successful business are your employees. Employees are not like other expenses. They can give you a competitive advantage in the industry by turning one-off customers into repeat business and helping subsequently to grow your brand. Ensuring your employees get paid the correct amount and on time, makes them feel like they have a secure job. It also ensure they feel as though they’re respected, which ultimately increases their level of engagement with the work they do. In turn, this also increases employee satisfaction and decreases turnover – both of which lead to a higher level of service for your customers.

Payroll affects every aspect of a small business from the morale of employees to the financial stability of the company.

Payroll processing:

Payroll is the process of calculating, withholding and filing employment taxes along with paying employees their salaries. Handling payroll typically involves sending out payslips to employees. One of the first steps however is determining whether a worker is an employee or an independent contractor. Both employees and independent contractors can be paid through a company’s payroll, but there is a big difference with regards to the various payroll taxes.

Common problems that arise while processing payroll in house:

  • Failure at accurately deducting TDS
  • Errors in processing salaries
  • Not processing salaries on time
  • Failure at paying TDS to the IT department even after collecting it
  • Not adhering to the state’s regulations and compliances
  • Not including all liable salaries, such as directors’ fees and superannuation in the summation of their payments.
  • Not declaring fringe benefits and employee share schemes.
  • Falsely classifying employees as contractors.
  • Incorrectly claiming exemptions where they should not apply.

Rather than face these hassles, it is wiser to outsource your payroll processes to the experts. Irrespective of whether you are a startup or large organisation, at the end of the day these challenges will affect you in one way or the other.

Benefits of outsourcing payroll process in your startup or organization

First and foremost – Cost:

Big businesses can afford to maintain big payroll departments. For small businesses however, an in-house payroll service is a money burner. If you calculate the hours your employees spend on payroll-related activities, plus payroll software costs, training costs, printers, printing and distributing payslips, creating tax documents etc, you could be surprised by the result when you compare that amount to the cost a payroll service provider can offer.

Focus on core activities

The payroll function can consume a large proportion of your staff resources, especially if the staff in charge of the payroll are not trained specifically to deal with it or have the payroll function as a smaller part of their overall responsibilities. The benefits of outsourcing the payroll include freeing up these resources allowing your staff to concentrate on more essential tasks. You may even be able to reduce your staff’s size. Outsourced functions also give you better scope for expansion of your company with scalable services suited to your business.

Mitigate Risk:

Every year hundreds of new laws and regulations are introduced by the Government while some of the old ones are scrapped or revamped. It is important to be updated with these changes as they can have a huge impact on the payroll process. If not followed to the T, companies may end up facing tough fines as well as legal hassles. Payroll outsourcing companies take care to employ experts in their field and also take efforts for training them from time to time to make sure they do not get complacent about their knowledge.

Leverage technology:

Just as important as expertise is new technology. Employers today rely on technology to operate more efficiently.  As a business grows, employers have more employee records to keep and also need more reporting. Lack of technology becomes a hindrance to scaling for growth of the business. Employees also expect technology. These days they want options like direct deposit and self-service access to their payroll information online. Companies that aren’t able to provide such options may be at a competitive disadvantage.


In-house payroll activities function as reliably as the people doing the work. With a payroll service, output, speed and quality won’t vary in accordance with holidays and sickness. There is always a risk that you may lose one of the key members of staff that deal with your payroll and all their knowledge walks away with them. If this happens you could find it extremely difficult to replace them, causing a logistical nightmare come payday. You also won’t have to spend time training new staff or helping them to understand your business’s payroll system.

Outsourcing payroll services can bring peace of mind. Basically there are no headaches, no hassles, no stress, no worries: You’re left to focus on running your business knowing all payroll obligations are dealt with correctly, efficiently and lawfully.