Outsourcing Your Payroll Operations
One of the most useful accountancy services for a small business is the ability to outsource their payroll operations to a third party. Payroll processing is a difficult and time consuming activity where small mistakes can have a big impact on employee/employer relations. It’s no surprise then that for many decades now a wide range of businesses have chosen to outsource their payroll processing to a third party.
There are a wide range of companies and online services that you can outsource payroll to.
Payroll Outsourcing Companies
Of the core business functions, payroll is often the most frequently outsourced business process. This frees up the business to focus on other areas such as sales and marketing.
The costs of outsourcing the company payroll vary according to the level of service required. A basic payroll service is inexpensive. Many payroll outsourcing companies have a range of value added services, including employee telephone hot-lines and direct deposit of salaries into an employee’s bank account. Many of the larger payroll specialists also offer websites where employees of a company can log in and check their payslips and check that deductions are accurate.
There are a wide range of payroll outsourcing companies. One of the largest and best known is ADP (Automatic Data Processing Inc.). ADP supply outsourced payroll services for small, medium and large sized businesses. Clients of ADP either use them exclusively as a payroll provider, or they use ADP to outsource other aspects of HR such as hiring of employees.
Offshore Payroll Outsourcing
Offshore payroll outsourcing can have benefits such as being much cheaper to implement, as well as timezone differences making it possible for work to be carried out more quickly.
When choosing an outsourced payroll provider based overseas then it’s essential to ensure that they are aware of the local tax regulations in your own country. Ideally it’s better to choose a company that have a physical office based in your own country.
Benefits of a Payroll Outsource
There are a wide range of benefits of outsourcing your company’s payroll operations, including:
- Outsourcing the payroll reduces costs. Small businesses don’t have the resources to maintain a dedicated payroll department. While bookkeepers can manage a small payroll, it’s difficult to find a bookkeeper who can manage all the financial aspects of a business from payroll to accounts and dealing with banks and the tax authorities.
- Dedicated payroll outsourcing companies have good internal systems which minimise the risk of errors in an employee’s pay. This is important as salary payments get ever more complex due to new tax laws, as well as a wide range of deductions for pensions, student loans, healthcare etc.
- Fraud protection. Outsourcing companies have anti-fraud measures which can spot common payroll fraud such as mis-reporting of hours worked or even phantom employees.
- Scalability. Outsourcing companies can deploy extra resources on your account should your business have a seasonal fluctuation in the number of employees. This makes it much easier to handle seasonal workers while ensuring that existing employees get their payrolls processed on time.
Although there are many benefits to outsourcing the payroll, remember that there are also pitfalls. The most important factor to remember is that your company is the one who is legally liable to pay the IRS/HMRC or other tax authority the income tax due by your employees. It’s therefore important to choose a reliable payroll outsourcing company, and one that is familiar with your country or state’s tax regime.