Payroll outsourcing is the process of managing payroll related tasks of a business firm by an external service provider. Even though payroll tasks can be managed in-house by the business firm, often it is time consuming and tedious process for the firms. In this regard, outsourcing of payroll tasks to service providers makes business sense for companies especially for a small and medium business firm.
Benefits of payroll outsourcing
- Reduce costs: Outsourcing of payroll services can reduce direct cost involved in processing payroll.
- Boost the productivity: Outsourcing payroll services brings down the burden of the employees and enable them to focus on other core areas of the business.
- Brings in professional insight to the process: Service providers will be well aware of the payroll related laws and compliance and changing regulations which normal employees in the office may not be aware about.
What payroll tasks should be outsourced?
Taking decision on outsourcing is easy for companies, but what to outsource is the question that puts them into dilemma. Below is the list of services that a company can consider to outsource under payroll services:
- Administration services: Payroll processing involves a lot of record keeping activities. The laws related to payroll require the company to keep the updated records of employees. Some law requires the companies to keep the records of the employees for three years even after they have left the company. Payroll outsourcing companies are well versed with such requirements than the normal employees in-house. Outsourcing payroll administrative tasks will help the company to comply such requirements by the law.
- Collection of timesheets and invoice: Outsourcing this process will relieve the firms from the burden of doing computations. The companies should review the timesheet and invoices first to find out if there is any malpractice in terms of overtime and over billing. Then it can be outsourced to covert the numbers in the sheet to actual cost.
- Payroll Processing: The major benefit of outsourcing payroll processing will be time saving. Calculation of salaries and wages is the biggest challenge in payroll processing. Even though automation processes assist in processing, it is not always a quick and easy way to do it. If companies need a control over the process, they can choose to hire a freelancer who can assume the role in-house.
- Tax compliance and payment: It is not necessary that companies will be aware of all tax rate information and government regulations and is moreover complex to understand. Outsourcing of tax service will relieve the company from the burden of keeping track with the changing policies. Services providers will help the companies to organize the payroll system to account for all the taxes paid by the employees and also help the employees to file their taxes in time.
- Preparing Cheques: All the payroll systems require preparation of Cheques to be delivered to the employees in many firms, especially the smaller ones. Service providers save the time of management in this step by taking up the responsibility to print, assemble and distribute cheques to the employees.
It is advisable to outsource these time consuming process to an external party as it will allow the companies to grow their business rather than worrying on the complication that may arise by doing it in-house.