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 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 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?



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 which 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 which 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

The differences between the employee’s time and an accurate time record can mean you are overpaying your employees. The average amount businesses are overpaying their employees is shown to be 4%. Outsourcing your payroll is an effective way to keep a more accurate attendance record. 


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 the 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.


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 which 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 the payroll provider. This will eliminate the risk and hassle of protecting it in-office.


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 which could potentially be invested towards your business ventures. Any alternative which allows you to reclaim this time should be considered as 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 hand-over, 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.


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?


About the Author:

With over 25 years’ of versatile experience in Payroll, HR and Project Management, Gerald’s profile is like none other. As an International Trade & Management Expert, Gerald has helped countless global businesses grow and ensure compliance across the ANZ region.
Read more about Gerald Bot.