Monday, 29 February 2016

Pros & Cons on Outsourcing Payroll

Whether you own a multinational company or a small business, your payroll service costs should be managed and budgeted for in the same way as any other cost in the business. This is especially true if you have a small business where costs represent a significantly higher proportion of income than larger businesses. Although you may be having very few employees, the system you use to manage your payroll does not cost you significantly less than that for a company that has many employees. This is why if you believe that you are spending a lot of time and money managing your employees’ payroll then it is high time you outsourced.

In every day’s running of a business, outsourcing has become very important. In fact, the rise of affordable outsourcing solutions has enabled many businesses to diversify into doing other things that they were not able to do before. Although some businesses are yet to embrace this trend because of the cons, many have decided that it is the way to go. The key to succeeding in this is looking for the best partner that can handle your outsourced services without any problem. More so, a true outsourcing payroll partner will allow you to maintain a firm base. But what are some of the pros and cons of outsourcing payroll services?


· Saves you a lot of time; according to a survey that was done in the recent past, small business owners claimed that managing payrolls is one of the greatest burdens that they have to bear. As a matter of fact, each pay period requires a considerable amount of time and effort. It is, therefore, ideal to outsource so that you can free up time that can then be spent in other areas of the business.

· Improved security; when you outsource payroll services, you offer a secure system for company’s data and sensitive employees. This is because these companies employ multiple server locations, redundant backup up systems and the latest technology to protect your data.

· Saves you costs; typically, during payday period, you must prepare payroll taxes, calculate wages create reports among others. By outsourcing payroll services, you can spend time that could otherwise be used to do such things on profit generating activities.

· It calculates tax accurately; if you are a small business owner you understand that calculating the deductions involved with the employee payroll can really be hectic this is why having a payroll company that is equipped to calculate correctly and accurately is important. More so, the company will ensure that the taxes are paid on time so that your business is not penalized in any way. Remember, the amount levied on nonpayment of tax on time can cost more than what you could have paid had you done this on time.

· Provides document management services; outsourcing your payroll services will also provide you with document management services that can track and manage the flow of information that concerns payroll services. Apart from these, data checks, employee communications, compensation services, regulation compliance among other services can also be provided.

· Helps in regulatory compliance; it can be really difficult to keep abreast with payroll tax laws and penalties because of the errors that can occur. Since payroll service providers know everything to do with payroll, they will help you stay compliant with payroll related regulations and laws.

· Easier for new staff; a user-friendly payroll service will be much simpler and easier to use especially for new staff members. Since many companies change employees every now and again, having an easy to use payroll system will definitely make the work easy especially for new staff members.


· Difficulty in getting employee data; depending on the company that you have outsourced you may encounter a lot of difficulties in accessing employees’ payroll figures and other data since this information is often kept in another company’s server.

· The wrong company can produce errors; if you choose a payroll company that has never dealt with some aspects of your company’s data before, you can end up with a lot of errors in the payroll unknowingly and correcting these mistakes can be very difficult. A company that does not have a system where businesses can enter their employees’ data directly can also introduce a lot of human error while trying to do this manually.

· You may pay for services that you do not need; by outsourcing payroll services, many companies have ended up paying for services that they do not need. This ultimately increases the costs of outsourcing payroll services and it is true that the additional services offered do not benefit the company. This is why before choosing these services you should carefully outline what your business is looking for.

· If anything wrong happens you become ultimately responsible; if taxes are not remitted on time and accurately, your business and not the payroll company becomes responsible. This might be the case especially if the payroll company has an unscrupulous employee who has the ability to embezzle the company’s funds.

· Risk of the company going out of business; in most instances, payroll companies especially the ones that are new in business are likely to go out of business. If this happens you are likely to lose access to your payroll data and in worst situations, your money. It is, therefore, important to ensure that you look for a stable company before doing any business with it.

Wrap up

Outsourcing payroll services can save you time, money, as well as your sanity. However, before settling on any one company, you should ensure that you get a few quotes that you can check for reviews before eventually choosing the company of your choice. By doing this, you will know if any company has given poor service before. Irrespective of the number of workers that you have, outsourcing this important service will save you time and money not to mention a great deal of frustration. More so, by paying your employees on time, they will more than happy to work for you. In addition to the obvious, there are many advantages to outsourcing this service.