As a leader in your organisation, you want to make beneficial decisions to streamline the business’s resources for growth and sustainability.

There are typically two options with payroll: doing payroll in-house or outsourcing. Payroll outsourcing is becoming a more common solution because payroll outsourcing services have a group of payroll experts with a full spectrum of expertise to ensure compliance and the best setup of your payroll.

With access to such expertise at an affordable price, how could it not make sense to switch?

Payroll outsourcing can benefit your organisation tremendously; however, everything has pros and cons, including payroll outsourcing.

Five Pros of Payroll Outsourcing

Access to Payroll Expertise

When you outsource your payroll, you get access to a payroll professional with the support of a whole team of experts in their office. This advantage will increase the standard of your monthly processing, data security, tax reporting, and legal compliance. Outsourced payroll providers hire individuals who have an in-depth understanding of payroll laws and regulations, including complex payroll tax issues.

Greater Efficiency

Work experience makes a difference. When you outsource your payroll, you gain access to some of the most experienced individuals in the payroll industry, which guarantees improved payroll processes and ensures easier tax filing and better wage management.

Reduced Risk

No business is ignorant of the devastating results of non-compliance, data leaks, and other administrative mishandles/failures. With more data moving to digital platforms, it has become easy to access and distribute, making it increasingly necessary to reduce business risk. 

Although software solutions have become the foundation of managing, capturing, and processing data, these solutions are very seldom mastered, and as a result, companies often face a higher risk. 

This is where payroll outsourcing comes in. A payroll outsourcing company sells itself as a security service for your payroll data, overseeing access and control. 

International Growth

If you run an international payroll in-house, you will need a payroll administrator competent in tax law for multiple countries, which can be seemingly impossible without support.  

When you outsource your payroll to an international payroll service provider, you are supported by a team of experts who will specialise in payroll laws and regulations for different jurisdictions. This allows you to quickly hire people in other countries and grow your business worldwide.

Improved Business Focus

It’s easy to be a busy business but very hard to be an effective one. Payroll is one of the most demanding administrative duties in the office and can sidetrack your focus and Human Resources. When you outsource payroll, you have less to worry about and more time to focus on primary business functions.

Five Cons of Payroll Outsourcing

Time-Consuming Implementations

Depending on what solution your business needs and how much customisation is required will determine the amount of time needed to implement the outsourcing solution. It’s also likely to require labour-intensive collaboration across departments to gather the necessary employee and company data. This collaboration will need multiple internal and external meetings to bring everyone on board with the changes that the solution brings. 

Most payroll service providers understand this impact on your organisation and have therefore developed more efficient ways to ensure a smooth transition. Some payroll service providers provide project timelines, hands-on assistance, and resources to help bring clarity and familiarity with the new solution. 

Limited Data Access

When you sign over the control of payroll data to a payroll service provider, one of the jobs you are allocating to them is payroll input. In other words, if you want to make any changes, you need to communicate the desired changes, such as raises, bonuses, positional changes, etc.

For some companies, this is not ideal as they want to feel more in control of their data. However, this has become a lot easier with the use of secure collaboration software capable of streamlining the process while keeping sensitive information safe.

Security and Data Breaches

A data breach is one of the worst things that can happen to a company. A data breach can cause a decline in employee satisfaction and incur a hefty fine if you are found non-compliant with local data protection laws. You should always be concerned if you are sharing any sensitive data. Unfortunately, very little protection is practised in a world of collaborative work and constant file sharing. This is the issue with using a third party; there is more opportunity for a data breach as you can only implement stringent protection methods inside your organisation and not inside theirs. Usually, this concern can be dismissed as payroll companies are at the forefront of data protection because data handling is their business.

Delayed Response 

In the case that there’s an urgent matter to be attended to before a deadline, it is not as simple as speaking to your colleague at the opposite desk. Your payroll is being handled by someone in a different business/building, and it may not always be quick and easy to reach them. Be sure that you know the working hours of your provider and that there are clear ways to contact them. Some companies may have the following options for contact: work-number extension, cellphone, email, Microsoft Teams, or another collaborative software.

Liability

Although outsourcing your payroll typically reduces your risk of non-compliance penalties, it can still happen. In this event, payroll companies have removed themself from the liability, leaving the responsibility of paying penalties to the client.

Additional Expenses

The pro of signing a specific service contract can also become a con. Let’s say that your service agreement carries some services you don’t need, and now you are paying for things you don’t use. In the same way, it might not cover the report you need to draw for the financial meeting next week, so you will need to pay for it. Therefore, it is imperative that once you select a service provider, you do a detailed needs analysis of the business to get the best value.

Some organisations may feel that they have many different requirements and need flexibility and therefore opt to do their payroll in-house in order to be able to assign many and varying administrative tasks to their payroll manager.

Payroll FAQ

How do I choose a quality payroll provider?

After you have asked around and created a shortlist.

1. Check the reviews of the different payroll providers and identify if they specialise in a particular payroll service. 
2. Approach your preferred providers to arrange a scoping meeting where they can understand your needs and send a comprehensive quote based on the factors identified in the meeting.
3. Choose a provider you know understands your business and can proactively contribute to better processes.

How do I choose the right payroll package?

To choose the right payroll package, you must first undergo a needs analysis with a payroll provider. The needs analysis will help you understand what data and resources each party needs to complete all the payroll tasks undertaken in a tax year. This information will determine which package is best suited for you