Why to opt for payroll outsourcing?

People who start a new business will be happy when they secure their first contract. The recruitment agency which has assisted in recruiting employees would then advice the management to opt for outsourcing payroll management to another firm. Outsourcing payroll management to a third party has its own advantages.

Payroll outsourcing is the process of contracting an outside agency to perform the work of managing salary, its calculation and payment, and other related functions. The main driver behind payroll outsourcing is reduction of cost and makes use of better services offered by third party companies.

payroll outsourcing. Image source mm-enterprises.blogspot.in

Payroll outsourcing may not be suitable for everyone, but still there are reasons which will justify payroll outsourcing for certain business. For example in the case beginners and freelancers, payroll outsourcing will reap higher benefits. Outsourcing will relieve employers from spending time on hectic paper works associated with managing payroll.

What a typical payroll outsourcing provider do is that they accurately record the hours and number of days each employee has worked. They calculate the salary of each employee based on the number of days each employee has worked and then deduct taxes and other options such as insurance before the payment is made. The salary is then paid through the employee’s bank account. The employee will also receive a pay slip which details the payment and deductions.

Payroll outsourcing provides numerous advantages to the organizations especially for small and medium enterprises. The benefits that the organizations enjoy are:

1. Direct Cost is reduced

Payroll outsourcing reduces the direct cost by offering services at reduced cost. Outsourcing providers enjoy economies of scale which will help them to offer services at reduced cost.

2. Indirect cost is reduced

Indirect cost involved in recruiting and training employees for payroll processing is eliminated by outsourcing it to an outsourcing provider.

3. Free from fear of penalties

Once payroll processing is outsourced, the management no longer has to worry about fines and penalties. Late and/or incorrect filing accounts for 40 per cent of fines paid by companies. Payroll outsourcing providers make sure that filings are made within the time line and that they are accurate. They also claim responsibility for late or incorrect filings.

4. Relieves manager from tedious work of payroll management

Outsourcing relieves mangers from the tedious job of payroll processing and will let them to focus on other business areas which need attention.

5. Management can concentrate on core issues

Management will be able to concentrate on core business issues rather than spending time on non core issues. This will save time and energy which can be utilized for value addition.

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