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Young, Small Companies May Benefit from Keeping Payroll In-House

Payroll outsourcing is an increasingly popular choice for HR departments that want to focus their attention on their core strengths and become strategic partners with the c-suite. But is it right for everybody? Maybe, maybe not. There are a few situations in which newer, smaller companies might be better served by keeping payroll in-house.

17-May-2016

It’s less expensive

Smaller companies may find that the time and personnel required to process payroll in-house costs less than outsourcing. To find out, calculate how many hours it takes to process payroll, and multiply that times the hourly rate of the employees involved. And don’t forget to include ancillary expenses like the cost of correcting mistakes. Compare that to what you’d pay an outsourced partner to do the work for you – and don’t forget to include the costs of any internal employees who oversee or review the work.

Your operations are primarily local in nature

One of the things that makes payroll so challenging for multinational businesses operating in the APAC region is juggling the many different labor laws and tax systems. If you’re operating in only one or two countries, you may be able to handle that in-house with little additional effort.

Customer service and response times are priorities

When employees’ checks are wrong, they need help now. In small companies, payroll problems can often be rectified more quickly by an in-house employee who’s familiar with both the systems and the people involved. One thing to consider before outsourcing is what the response time is when it comes to correcting mistakes, answering questions, and providing reports. And, if all of your requests go through one account representative, what happens when that person is out of the office? It can be a lot easier to just walk down the hall and chat directly with the person who can help.

Your business requires customized services

Many of the large payroll outsourcers provide a cookie-cutter solution that all of their clients use. When that happens, the client usually ends up adapting to the payroll outsourcer rather than the other way around. If your business has unique needs, you might be able to meet those needs in-house more effectively than changing your processes to meet those of an outsourced provider.

There is a cloud-based platform that meets your needs

Before the cloud, payroll software packages with all of the bells and whistles and robust functionality were available only to enterprise-level organizations. Today, the existence of the cloud and the prevalence of software-as-a-service (SaaS) providers brings that same functionality right to your desktop. Even the smallest companies now have access to payroll platforms with a full range of features, and therefore might not see much of a gain in productivity and ease-of-use from outsourcing.

There’s no single solution that’s right for all businesses – or even all small business. Whether to outsource your payroll functions or keep them in-house is something only you can decide. As a general rule, the simpler your business model is – operating in a single company, employing an easily manageable number of workers, etc. – the more likely it is that keeping payroll in-house might be your best solution.

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