Advantages of Payroll Outsourcing
The payroll function in any organization can be handled in essentially one of three ways – internally using manual processes, internally using offline or online payroll software, or by outsourcing the function to a payroll company. The last case is also known as payroll outsourcing. Payroll is outsourced for a number of reasons. The key benefits that payroll outsourcing brings to the employer are:
Time savings: Payroll is a critical function for any business, and-when done manually-demands much time and utmost attention to detail from the payroll department. What’s more, payroll has to be rolled out pay cycle after pay cycle and thus places a constant demand for time and effort from the department. Outsourcing this function immediately frees up man-hours for more strategic and business-critical tasks.
Cost savings: Studies indicate that over 40% of small businesses in the USA pay, on an average, close to $1000 each year as penalties for late or incorrect filings. Outsourcing payroll to professionals who know the domain like the back of their hands can do away with these costs, in addition to the cost savings brought in by eliminating the need for an internal payroll department.
Data security: “How safe is my data?” is a question that every employer asks himself while handling the payroll function internally. Avenues for loss of data include abscondment of payroll executives, identity theft, tampering with business-critical records for personal gain, etc. Contrast this with the state-of-the-art online payroll software that a payroll company invests in, as payroll outsourcing is their core business. This ensures world-class security for your confidential payroll data.
Statutory compliance: The legal landscapes of countries are constantly evolving and keeping up with the pace of this change often presents a bottleneck for most small and medium businesses. It is, on the other hand, the business of a payroll outsourcing company to keep up with these changes to rules and regulations in statutory compliance, such as tax slabs, statutory deductions, and the like.
Domain expertise: It is not often that small business owners are in the know of the nitty gritties of the payroll domain. This lack of expertise can easily lead to glaring errors if payroll is being processed on applications such as Excel. The requisite expertise is brought in by payroll companies, who specialize in the complexities of payroll processing.
Better reporting: Often, the list of payroll-related reports that needs to be generated by the employer is long, not to mention that these need to be made available in the specified format. In-house payroll departments may not have the capability to generate these reports. On the other hand, payroll processing companies offer a wide range of reports that address the most common reporting requirements. What’s more, requests for company-specific as well as ad-hoc reports are also commonly handled by payroll companies.
All in all, outsourcing your payroll process can lead to considerable cost and time savings, improved data security, better compliance, access to experts and better reporting. These make for compelling reasons to explore the option to outsource payroll.