Each business is different from the next, from its size, goals and needs. But payroll is something that every business must manage and payroll outsourcing can prove to be highly beneficial.
You see it time and time again – internal payroll teams scrambling to ‘cross the t’s’ and ‘dot the i’s’ throughout the business calendar, particularly during the end of the financial year, as the risk of accidental non-compliance looms.
This situation plays out across businesses of all workforce sizes and industries. An immense amount of internal resources is dedicated to almost around-the-clock payroll attention – all whilst juggling other priorities of the business.
You don’t really see businesses nowadays attempting to handle their own IT issues, as outsourcing this expertise to IT helpdesks is now commonplace. After all, you have a business to run so why would you spend time trying to troubleshoot that complex server error message on your monitor and risk erasing all of your data?
Just as businesses outsource IT solutions, why not offload internal payroll to a payroll outsourcing service so the business can focus on its core priorities? This approach not only reduces the administrative burden but also ensures that payroll is handled by experts who are up-to-date with the latest regulations and technologies.
Payroll Functions Which Can Be Outsourced
Imagine how much time and risk could be saved if functions such as the following were handled by payroll outsourcing:
– Superannuation processing
– Reporting and payslips
– Rostering and time attendance
– Monthly regulatory lodgements
– End of financial year processing
– Award interpretation
– Keeping up to date with the latest payroll changes and regulations such as payroll tax
For businesses that have been handling their own payroll in-house, it’s easy to question the value of payroll outsourcing when they have been managing themselves since day one.
But there are some valuable benefits of payroll outsourcing for businesses to consider:
You Are Incurring Direct and Indirect Financial Losses
1. You Have the Cost of Financing In-House Payroll
Clearly, choosing to complete your payroll in-house comes at the cost of having your own payroll team. This practice is considerably expensive, as you must pay all the associated wages and benefits of employing the team, not to mention the other hidden employment costs, such as staff-retention and recruitment costs.
If your business is reasonably small in size, there’s a considerable chance that the cost of employing this team would be significantly greater than the cost of using an outsourced payroll service as required.
2. You Must Purchase and Update Expensive Software / Technology
One thing we can all agree upon is that payroll software is not cheap. When choosing to complete your payroll in-house, you will need to purchase and update the latest software for all your payroll needs. Such programs can include “benefits management” software, “time and attendance” management, as well as other services such as the automated sending of pay slips.
By contrast, those who choose to implement payroll outsourcing have the privilege of a simple periodic payment. This means that their whole payroll function is taken care of in this one payment.
3. You Have the Cost of Providing Training
Having your own payroll team comes at the cost of providing effective training. To ensure compliance, you must ensure that your payroll employees are always up-to-date with the latest government regulations and any changes in policies. Providing this training is time-consuming and costly. Those who choose to use outsourced payroll gain access to payroll experts, without having the worry or financial burden of providing the latest training.
4. You May Incur Serious Penalties and Charges
Choosing to complete your own payroll comes at the serious risk of paying a penalty for a mistake. Consider the risk of unintentionally omitting information, making a late tax deposit, or incorrectly classifying a worker’s employee type. These a just some of the common mistakes that can lead to hefty penalties. If you do choose to outsource your payroll, you will never run the risk of having this financial consequence.
5. You’re Likely to be Overpaying Employees
Inaccuracies in timekeeping can sometimes lead to overpayment of employees. Studies have shown that businesses may overpay their employees by an average of 4% due to discrepancies between recorded and actual work hours. Outsourcing your payroll can help ensure more accurate time and attendance records, reducing the likelihood of such discrepancies and ensuring fair compensation for all employees.
Unsure what your business would be spending on completing its own payroll? Use an online calculator to gain a clearer picture.
You Do Not Have Industry Experts to Ensure Compliance
Payroll mistakes are all too common and all too easy to make. For example, you may assume that the overtime rate is 1.5 times the employee’s hourly rate, but this is not always the case. These unintentional mistakes can place your business in hot water.
By contrast, those who choose to use payroll professionals have peace of mind, knowing that the experts are always up-to-date with the latest information such as changes to payroll tax. Choosing to outsource payroll ensures constant compliance with the latest regulations, reducing the risk of costly penalties and legal issues.
Your Security is At Risk
Choosing to conduct your own in-office payroll is a significant security risk to the entire business. Some of the risks include identity theft, misuse of profits and interference with your business records. Keeping your data localised in the office is always a risk that depends on security software for its protection, which must also be provided at your expense.
Another benefit of outsourcing is that the protection of your data will be met by the payroll provider. This will eliminate the risk and hassle of protecting it in-office, as professional payroll services use advanced encryption and secure data storage solutions to safeguard sensitive information.
You’re Wasting Valuable Time
Completing your own payroll is significantly time-consuming, and requires tedious re-checking of data every pay period. This process consumes efforts that could potentially be invested towards your business ventures.
Any alternative that allows you to reclaim this time should be considered highly worthwhile. Payroll outsourcing is so valuable as it allows you to reclaim this time, rather than spending it on administrative duties.
The Knowledge Behind Your Payroll May Leave
It’s inevitable that one day, your team members will decide to leave your business. In the process, they will be taking their invaluable payroll knowledge with them. No matter how thorough a role handover is, the reality is that this process will happen time and time again as staff move on.
Rather than worrying about a knowledge gap, an external team could be handling your payroll. Outsourcing ensures continuity and consistency in payroll management, regardless of internal staff changes.
Your Payroll Needs Will Scale
Outsourced payroll services can easily scale with your business as it grows, accommodating changes in workforce size and complexity. This flexibility is particularly beneficial for businesses experiencing rapid growth or seasonal fluctuations.
Scaling an in-house payroll team to match business growth can be costly and time-consuming. Outsourcing allows you to pay for payroll services based on your current needs, avoiding the overhead costs associated with hiring and training additional staff. By outsourcing payroll, businesses can focus on their core activities and strategic initiatives. This is especially important during periods of rapid growth, where attention needs to be on scaling operations and meeting market demands.
The benefits of outsourcing payroll functions for businesses are difficult to overlook. Whether a small, medium or large-sized company, it’s a great initiative for a business to consider.
What’s been your experience in either managing payroll internally or sourcing it?
If you’re interested in exploring how payroll outsourcing can benefit your business, contact our payroll experts today to discuss your specific needs and find the best solution for your company.