Why would a company outsource payroll?
What is payroll?
First and foremost, let’s clear up the most basic issue. Many business owners start off small, perhaps as just a one man band, realise their business’s potential, and then quickly have to take on employees. After which, the process of managing your finances becomes slightly more difficult, and as you take on more and more people, you need to find a way to organise it.
A company’s payroll is simply their list of employees. That is everyone who they employ and pay to work for them. Business people often also use the term payroll to refer to the following:
The total amount of money which a company pays to its employees.
This refers to every employee, their full wages or salary including any bonuses, and not including any deductions. These amounts will all be added up, totalled and the amount will be used as part of the accounts records.
The company’s list of employee’s salaries and wages, bonuses and taxes.
The details of all money paid to each and every employee must also be recorded. For some this may involve totting up the hours they have worked, their hourly wage or salary and any additional payments which have been made to an employee. Many companies use time sheets, rotas or clocking in machines to keep records on times and hours that have been worked in a week. It is also highly advisable to take note of how many sick and holiday days your employees have taken. Taxes also have to be calculated for each employee.
The department in the company which calculates and pays employees.
Some companies have a specific department within the business which organises the payment of employees. Within a company, this department is often also referred to with the term ‘payroll’.
The Benefits of Outsourcing Payroll
Outsourcing payroll has many advantages. Handing over this essential part of business to an external partner can save time, money, and compliance headaches, making it a wise move for multinational companies of all sizes. This is why an increasing number of enterprises and small business owners are turning over their payroll function to professional providers who offer specialized, fully managed payroll services. To discover whether outsource payroll is a good fit for your organization, consider the following benefits.
Save on time and cost
When you are running a business, time is, quite literally, money. Processing payroll in-house is time-consuming and requires lots of attention to detail, and that demand increases as staff numbers grow. Time spent on payroll, managing considerable amounts of data and ensuring no miscalculations are made, is time taken away from the core tasks of your business. Many of the cost savings associated with payroll outsourcing reflect the time a company can win back by not doing these duties in-house. By outsourcing payroll processing, which can include everything from calculating payroll taxes and statutory filings to handling payroll enquiries, your organization could be much better off financially.
Improve data security
In-house payroll comes with a lot of risk, including identity theft and embezzlement. Even if you are be confident that your payroll software is secure, there is also the safety of the server or network to consider. Quality outsourced payroll providers protect and store data on highly secure cloud-based servers and use cutting-edge encryption technology to ensure your critical information is safe. They also use electronic payment methods so that if an error occurs, it can be easily traced, helping to protect you against potential losses. This is all included in the outsourced service they provide, while attempting to do the same in-house would be very expensive.
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.
RESOURCES
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.
Avoid Losing Payroll Expertise
By outsourcing the functions of your payroll department, you can eliminate the need for costly transfer of information between former and new employees. Outsourced payroll services can be relied on to maintain a consistent approach to payroll management. There’s no need to induct employees on logic or how technology platforms operate. Role transfer can be reduced to the functions and outputs of the payroll service.
Simplify Reporting
With complete transparency and immediate access to accurate information that doesn’t need to be verified, management can more effectively plan for growth and predict changes to staffing needs.
Reduce Redundancy
With less data inputs by fewer people, task management and delivery can be managed with greater consistency while eliminating redundancy.
Pay your employees on time:
Besides having payroll software, Third Party Payroll Services provider will also take care of paying salary to all your employees on time, fill their income tax, form 16, etc. helping you to avoid any penalties related to late payment.
Be in compliance with evolving regulations:
Third-Party Payroll Services providers have a team of professionals who continuously stay updated with the regulatory changes introduced by the state and federal government related to tax payments. As your business expands, you need to establish new offices across various geographies and be in compliance with local as well as national compliances.