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Payroll outsourcing has been beneficial to many companies and continues to grow in popularity despite the covid-19 disruption.

Payroll outsourcing can be extremely beneficial, we covered this in – Top 7 Reasons Why Companies are Outsourcing Payroll – ReyPath Solutions. However, the benefits look a bit different for different companies.

In this article, we want to elaborate on the benefits for different businesses based on their size or phase regarding financial benefit.

The Problem

There are numerous hero stories from payroll professionals on how they saved their companies money. However, these hero stories often arise because of a mistake. One such story took place with a Company that lacked the manpower to process their bargaining components on the payslips and faulted in their payments to the bargaining council. After several months the penalties rose to over 5 million rands. What happened is that a newly brought-in payroll professional took on the job to rectify this mistake and spent three months in SARS queues and visiting the bargaining council to clear the mistakes and reduce the penalties. 

The Solution

Companies can fail or falter because of a lack of manpower or diligence. This is a gap that payroll outsourcing can fill. This is because payroll outsourcing companies are experienced and equipped to handle difficult and complex situations and reduce risks for the company. Payroll outsourcing companies mitigate risk by having a team of experts that can handle unique situations and experienced professionals that ensure the payroll handling and setup is as effective and accurate as possible.

Benefits for Small to Medium businesses

In small to medium businesses, outsourcing payroll is extremely common and beneficial. This is because payroll requires expertise, and most small business just don’t have the cash flow and workforce to justify a full-time payroll administrator.

Secondly, when they outsource the payroll, they can have their payroll handled by an expert for a fraction of the cost. And they don’t need to be concerned about non-compliance and other things that could side-track their time.

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Benefits for International Business

Outsourcing an International Payroll can help with the high learning curve that a new market/country can bring. A lot of time and, ultimately money, would need to be put into a payroll administrator to get them trained and comfortable with a new market/country. But if it’s outsourced, you gain an expert almost instantly without paying tuition fees.

The international payroll outsourcing solution also helps make your business more nimble as you can enter and exit markets with less hassle. This can ultimately save your company money and time as well as accelerate your growth in these new markets/countries.

Benefits for Growing Business

If you happen to be a company with a payroll team, you may also find it helpful to outsource sections of your payroll as you grow. This can help alleviate pressure from the team as you grow and set up new processes or scale existing processes.

Such setups where the payroll function is partially outsourced are not common, and is often done in a consulting setup as it’s temporary.

The extended benefit of doing this is that additional expertise does not need to be sourced and internally hired for a short period. This can create unnecessary work for HR, when the same can be done by a service provider without the hassles of hiring.

Benefits for Large Business

Some large businesses may benefit financially when outsourcing the payroll setup is complicated and requires a lot of maintenance. However, if your system requires little attention, this may not be a solution for you.

What could decrease your cost is a streamlined and automated payroll input capturing system that easily collects and shares any payroll changes e.g position changes, payslip changes, employee onboarding, claims, hours, etc. What also plays a large factor is complicated commissions and payslip components. These components require attention which requires expertise and time.

Another way that Large Businesses could save money with outsourcing is by outsourcing the few functions that the current payroll team is not able to accomplish. By doing this, the company could keep a compliant payroll without needing to hire a payroll expert full-time. This kind of outsourcing is sometimes done in a consultant setting.

Summary of Benefits

The relief that payroll outsourcing brings truly frees businesses. Companies no longer have to worry about legislation changes, taxes, inputting wrong info, or incorrect leave. When you have a payroll professional handling your payroll, it’s better for everyone. The peace of mind is worth every cent.

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