REASONS WHY COMPANIES OUTSOURCE THEIR PAYROLL
For many businesses, outsourcing of payroll services is a valuable alternative to in-house processing. When chosen correctly, payroll services provide a less expensive and simpler means of paying employees, tax filing, and performing a host of other payroll related duties. However, choosing poorly is like starting a new job you weren’t right for in the first place-it’s a hassle to leave, but if you stay, you’ll be perpetually frustrated.
What then is Payroll Outsourcing?
Payroll Outsourcing is a business practice that involves contracting with a business service to handle all functions related to a company’s payroll i.e a company’s list of employees and the total amount of money the company pays to them (including bonuses and withholding taxes).
The size of a company and the amount of time available for dealing with payroll related issues in-house should be considered before a company takes a decision to outsource the payroll.
Payroll outsourcing makes it possible to manage the payroll processes of a company without the need to maintain a large payroll department. There are several reasons why companies outsource their payroll, the first and common being to save time and money on the handling of financial tasks associated with a payroll. By contracting with an outside vendor, it is possible to restrict the payroll team to one or two individuals within the company. Often, these two selected individuals are authorized to supply basic data to the payroll service, which then handles the rest of the details. As a result, there is no need for anyone to spend a majority of the work week calculating hourly wages, taxes, and the likes. Also, the capital freed up by outsourcing can be invested more profitably elsewhere in the business.
Other reasons why companies outsource their payroll include the following;
- It eliminates the responsibility of the employer to keep up with changes in regulations that impact the calculation of taxes. Since the outsourcing service constantly updates their information to comply with current laws, the employer does not have to worry about unnecessary fines and penalties as a result of improper calculation of the taxes due.
- It prevents an employer from having to deal with technological woes. Since the payroll is processed off-site, there is never a need to upgrade payroll software or spend time and money on program or hardware glitches or any of the system issues that can occur and slow down the payroll process.
- It provides better reporting in alignment with a vast array of reporting solutions. The reporting solutions available might not be possible with in-house payroll software and they take longer time for in-house IT department to build. Payroll service providers can provide quick, ad-hoc reports to suit a company’s specific needs.
Payroll administration can bog down a company’s internal staff, diverting attention from more important activities related to developing the business. Professional payroll preparation services allow businesses to save money and improve productivity. At the same time, a professional service affords access to payroll experts and advanced technology, ensuring that the paperwork is completed in a timely and accurate manner. For most businesses, putting payroll in the hands of experts is not only a relief, it is a smart move.