Payroll is a time-intensive and laborious task, but it is also an important function of any business. Like most departments, payroll can be in-house or outsourced.
In-house payroll
An in-house payroll function means that an internal team handles all matters associated with employee renumeration. These usually include calculating wages, ensuring that the correct amount of tax is deducted from each pay slip, ensuring that the correct deductions from time-off, retirement contribution, and such, and initiating direct deposits, amongst other tasks. Having an in-house payroll department assures control over sensitive and confidential company data.
Outsourced payroll
An outsourced payroll function means that payroll administration and compliance will be contracted to a third-party organization. An outsourced payroll doesn’t have to be the only option. You can still have an in-house payroll department which is supported by the outsourced services, especially if your business is growing.
Why should you outsource your payroll?
- Cost effective: save costs on supporting a whole payroll department, including salaries, furnishings, training, staff turnover.
- Time effective: focus free time towards growing your business, stay compliant with tax obligations and other regulations and avoid late payment fees.
- Eliminate a single point of failure.
- Knowledge of legislations in different areas.
- Workload is split between another business with different expertise, not just on in-house department.
- No internal employee bias or conflict due to renumeration agreements.
Why shouldn’t you outsource your payroll?
- Limited access to payroll software, so you won’t be able to access data on-demand.
- Communication delays between the company and the service provider.
- Loss of control over sensitive and confidential company data. One way to protect against this is to ensure that the service provide is GDPR compliant as well as protection clauses in the service agreement.
The benefits of outsourcing payroll outweigh the risks. The next question is, when to outsource your payroll?
Essentially, any time is good to outsource your payroll processing. However, it is ideal to outsource your payroll at the start of the financial year in order to compile the necessary documentation before a new financial year starts. This helps streamline reports and employee agreements and maximise tax efficiency, eventually leading to easier payroll management.