One of the biggest reasons that companies outsource their payroll functions is for specialized expertise. Because of the many cultures, languages, and regulations these companies deal with, staying compliant is a challenge – and failing can be expensive. By using an outsourced payroll provider reduces the risk involved.
• Focus Better On Your Core Business and Save Time
Payroll is one of those critical functions that may not directly increase sales. But carried out poorly, it can put your business in a world of hurt. It can sap internal time and attention away from core activities and businesses have to comply with a wide range of laws when it comes to employees — from federal, to state and local. It takes considerable time and attention to detail to deal with them.
There are requirements around withholding taxes from the employee’s pay, and also calculating the employer’s portion of taxes plus obvious legal requirements, e.g. tax reporting and remittance. In some cases there are electronic or manual filing requirements — at the federal, state and local levels.
• Reduce Costs
When considering reasons for outsourcing any business activity, cost-cutting is often what comes to mind first. There are significant savings to be made over the long term for companies who have invested to a degree in in-house payroll functionality though. When the ongoing costs of good payroll software, the time required for processing wages and managing paperwork and tax liabilities are considered.
Ultimately, the extent to which payroll outsourcing will cut your costs depends on how efficiently you have been administering payroll in-house. In the longer term though, outsourcing removes the variable costs associated with staff recruitment and training, as well as updating your own payroll software to meet compliance changes.
• Enhance Security & Reduce Risks
Payroll processing is a complex and potentially risky business operation. Even with trusted employees, there is always a risk of identity theft or embezzlement of funds for personal gain. There’s also an ever-present risk when using in-house payroll software: How safe and secure is payroll data on the company’s server or network? This nagging question can consume a business owner’s energy and attention as well.
By contrast, payroll outsourcing providers offer a “safe haven” for your confidential payroll data. In addition to redundant backup and multiple server locations, a quality payroll provider invests in state-of-the-art systems for storing and protecting data, simply because it is part of the service provided to clients. Being able to ensure the privacy of your data therefore requires constant monitoring to ensure operational continuity and data protection.
• Compliance with Government Regulations
With laws that govern provident fund to calculation of taxes, employee benefit programs and incentives provided to staffers, it becomes challenging for organizations to process the exact reimbursements and salary for each employee.
Also human resource personnel is answerable to employees’ queries about salary considerations, wage increase, payroll processes and tax deductions clearly and confidently to deliver convincing answers. Hence matters such as these which consume a lot of productive man hours of HR personnel is entrusted to payroll service providers externally.