Payroll Outsourcing: What is it and why do it
Payroll Outsourcing Defined
Payroll outsourcing simply refers to the hiring of an external firm that will be responsible for some or all of the payroll functions for the company. These companies generally take the responsibility of paying the employees, distributing pay slips, obtaining the appropriate and up-to-date payroll software and making the necessary statutory deductions. Many companies whether large or small find it necessary to outsource their payroll function as a makes their job while ensuring that they are fully tax compliant. Payroll outsourcing is the fastest-growing aspect of the global human resource outsourcing (HRO) industry and research conducted estimates that that it is expected to grow at a CAPR of 4.4% during the period 2016 – 2020.
Why Outsource Payroll?
The benefits of outsourcing your payroll should definitely be considered before making a decision to hire a payroll outsourcing company.
- Payroll is a time-consuming process. Outsourcing your payroll process to a third party and allows you the time and convenience to focus on your core business with the knowledge that your employee’s work hours, pay rates and wage deductions are being handled.
- Outsourcing your payroll reduces the possibilities of tax compliance errors and possible fines that might be associated, as well as likelihood of missing key tax deadlines. That is because the payroll is being handled by trained experts that have the responsibility of being aware of all changes that are being made by the tax authority and making the necessary changes to ensure compliance with government regulations. So as an employer you can focus on other aspects of the business without the need to worry about missing tax deadlines.
- Payroll is not just about getting your employees paid on time however, that is an important aspect of the payroll process. Ensuring that employees are paid on time and that their statutory and employee deductions are accurate of the payroll process. Missed pay deadlines can lead to unhappy employees and continuous missed pay deadlines will result in. If considerate time and focus is not dedicated to the process of payroll, it can negatively affect your company, your production and your overall bottom-line. If you are constantly paying your employees late and missing pay deadlines then you should outsource your payroll process.
- Outsourcing your payroll is also cost-effective. Cost-savings can be calculated based on the time savings that is not spent on conducting your own payroll. Time saved is money saved. Outsourcing your payroll allows you to save time in the following ways allowing you to focus on the overall company business.
- Calculating payroll each pay period per employee
- Creating and Distributing pay slips
- Preparing and sending payroll taxes and tax returns to the government.
- Outsourcing your payroll also tends to less expensive than keeping payroll internal.
Things to consider when choosing a payroll outsourcing provider
To ensure that you have a seamless payroll process it is important that as a company you do some research into the payroll industry prior to choosing your payroll provider. Here are some things to consider when choosing a payroll outsourcing provider.
- Price – what is the price and additional fees that the company is charging and is it worth the service that they are providing?
- Service – what are the services being offered?
- Reputation – What is the company reputation? Reputation is a critical factor as the reputation will help to dictate when can be expected from your payroll provider. As this process is outsourced, business owners will not be able to oversee the process as they would with their other operations. There is therefore a risk of using an unreliable firm to conduct your payroll which can lead to more problems than solutions. It is important to review the company’s reputation whether by get references from other companies or other means available to ensure that you will receive quality service.
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