Outsourcing has evolved into one of the most effective and tested business models. In fact, it provides a competitive advantage to businesses in the long run. Outsourcing helps you delegate tasks, operations, or services that are costly, specialized, or distracting: to external specialists.
It helps you meet organizational needs and goals while freeing up capital that can be invested in research and innovation to increase your competitiveness.
Hiring new employees is a process that brings talent, ideas, and energy to the organization. However, keeping track of payroll for the workforce can be a time-consuming task. Furthermore, the compliance landscape is changing constantly and failure to comply with hundreds of tax regulations can invite penalties and be detrimental to your reputation.
You can avoid costly payroll mistakes by outsourcing your organization’s payroll.
What is payroll outsourcing?
Every time you hire someone, you need to pay them properly, and also take care of the payroll-related taxes. Payroll outsourcing involves outsourcing payroll to a third party. They’ll handle the payroll administration and compliance. This saves time and, more importantly, prevents costly mistakes.
Here are 10 reasons for outsourcing payroll
1. Focus on critical business functions
Outsourcing less important tasks allow the company to focus on the vital ones and grow the business. Your HR team can focus on critical areas, such as hiring and retaining top talent. They wouldn’t be burdened with the payroll function and could optimally add value to areas that matter most for growth.
If you maintain a separate payroll team, then you need to invest additional resources, and provide equipment, training, and facilities to the staff.
Outsourcing helps you to delegate tasks that are time-consuming, therefore affecting the competitiveness of the company, to external specialists.
2. Risk Management
Outsourcing reduces risks for businesses. Payroll experts with knowledge of statutory compliances, government policies, and regulations assist your company in avoiding any legal issues that may arise as a result of payroll. It also helps you avoid any situation where your internal payroll team becomes unavailable. Outsourcing partners have strict processes that account for the associated risks and ensure that your employees always get paid on time.
3. Employee Trust
Paychecks are one of the major reasons that people turn out for work every day. Your employees expect to be paid on time. Payroll services ensure that salaries are credited to bank accounts without fail. Any delay or error in the payroll is detrimental to employee morale.
Instead of reading company manuals and written policies, employees also like to ask questions directly to HR. This helps them to understand their take-home salary and make the required investments to save tax. A payroll management company can address these queries on behalf of your HR. This personal interaction goes a long way in establishing employee trust.
4. Advanced Technology
The outsourced function, such as payroll, is carried out by specialists. Since it is a core part of their business offering, their highly-trained staff innovates in ways that can also improve your payroll process. In this way, you can implement best-in-class payroll technology without actually spending on its R&D.
5. Cost Effective
Reducing labour costs is the main reason companies outsource. Hiring people requires paying their salary, government benefits, equipment, and employee onboarding. Outsourcing can reduce the aforementioned costs.
Good payroll management firms offer flexible service plans that can be scaled according to your growth. Whether you have one employee or thousands, you pay as per your needs. But considering the high payroll mistakes that happen due to non-compliance, costs associated with hiring payroll management services are minimal in comparison.
Compliance and labour regulations are constantly changing, making it difficult to keep up with the changes. A payroll management company will keep track of the changes in regulations and update the payroll process accordingly. Compared to internal payroll teams, a payroll management firm runs payroll operations on a massive scale and uses automation, updated IT systems, and employs key talent, to run the payroll cycle in a better way.
Many firms earn a significant part of their revenues from international markets. Depending on your base of operations and the location of the payroll management firm, you can take advantage of the time zone. If all arrangements are in sync, you can operate nearly 24 hours a day.
Due to a limitation of resources, payroll management is usually delegated less importance in an internal setting. As a result, the processes become outdated, and it is also difficult to develop in-house talent. Having the payroll function outsourced helps you to avail yourself the services of highly experienced specialists.
9. Data Safety
Salary and personal data leaks are embarrassing and detrimental to a company’s reputation. It can give rise to penalties and lawsuits. A payroll management service will have security certifications, internal controls, restricted access, and other safeguards to protect your payroll data.
10. Free up internal resources
Outsourcing non-core functions lets your company focus on core tasks. Your newfound time and energy can go toward new ideas. After all, outsourcing opens your company to structural changes, which can lead to innovation.
There are several payroll options depending on your needs and budget. You can consider the following options as per your requirements:
- Payroll software: It helps you manually run payroll, and calculate taxes.
- Accountant: You’ll need to find an accountant who specializes in payroll. They’ll take responsibility for mistakes, but their client load may limit their availability.
- Payroll service provider: They use payroll software to handle everything, including filings, taxes, and compliance.
Mynd Integrated is a leading global payroll services provider, offering innovative payroll solutions to employers of all sizes—start-ups, MSMEs, or large multinational enterprises—processing over 5 million payslips every year.
Read more: Top 10 Payroll Trends to Lookout for in 2022