Payroll Services - Outsourcing Pros and Cons

Payroll is one of the more critical departments of a company. In the area of accounting and finance, this is the total of compensation, subtraction, and benefits of all salaries in a company



If the company does not have a fixed system for calculating the salaries of its employees, it can be chaotic for the company to handle the payment of the employees. In addition to the payment of salaries, at the end of the tax year, there are payroll taxes that can influence the income of the company. For these reasons, a company must use an effective salary system. The standard in recent years is that larger companies outsource their payroll administration, but there are advantages and disadvantages for doing this.

A payroll section is one that offers the service to remotely perform the contract work of a company. You might wonder why a company would agree to outsource this part of their business, but if you realize that the company can save on that part of the business of fifty percent or more, the business starts to be wise.


Outsourcing has become a popular way to manage parts of a company that can be done by others. For example, a payroll company specializes in that kind of work. They are experts in every aspect and can perform the work at a very high level at a very attractive price.

This can free companies from the need to employ specialists to manage payroll administration. It could mean that all employees of the company concentrate on the core function of the company and not on the more peripheral parts. This, in turn, can mean significant savings that can be reversed to promote the company's objectives.

Maintaining a finance department in a company, especially a small company, can be costly. In the past, it was the only option, more or less, that a company had, and a full accounting staff was employed to perform the various functions needed to manage the different stages of the payroll procedure.

The outsourcing of parts of the daily function of a company became increasingly viable and popular in the last part of the 20th century. It started in third world countries where wage costs are lower than in the Western countries of the first world. Call centers are the most obvious outsourced function that comes to mind, but more and more other administrative tasks have been followed.


A payroll outsourcing company knows that there may be resistance to outsourcing something that is as confidential as salary information. For this reason, most of the companies involved in this service assign a team to each company to make them feel as much as possible that the outsourced experts are truly their external employees.

In a sense, that is exactly what they are, although they are not really employed by the company that outsources the payroll. A close relationship can arise between the managers or owner and the persons who perform the outsourced contract work to the point that they can be treated more or less the same as their own department.


The issue of confidentiality and business information security can be raised, and it is also a very valid point. No small company would want to think that their employee data, income, taxes and other relevant personal data could be leaked to anyone who does not have the necessary access to such information.

No outsourcing company that is worthy of its name risks to leave such sensitive information behind so everyone can see it and possibly abuse it. Their reputation depends on strict security and solid confidentiality. Trust is vital for any business and loss of trust means loss of business. Any reputable company for pay outsourcing can certainly be trusted.

Payroll can sometimes be a laborious process, especially for small companies with limited resources. Outsourcing can prove to be a great solution to overcome challenges related to Payroll Processing.

In the traditional set-up, a section that is considered the poorest performer in most organizations is often the payrolls section. The accounting wage administration services are often credited with greatly improving the wage process and saving money at the same time. Here are some advantages and some areas that can be considered as disadvantages of using them.

The main advantage of payroll services is often the ability to systematically access the verity of tasks without making mistakes. The result is often the improvement of the wage calculation and delivery, even in the light of some changes that may have occurred during the last month. The time saved when using these services is also enormous.

Even if you choose to do most of the work indoors, your old employees can interact and perform with simple training using comprehensive guidance in the light of updated legal requirements such as tax rates and associated benefits.

Security is often the most important area for management to address during data retention decisions; however, this is fairly easy to manage with security features such as VeriSign® to improve the protection of your data. The data is often checked for any changes, and each change is fully investigated and justified, giving you the opportunity to keep the confidentiality of your records at the same time and to have access to quick processing.

Real-time access is so valuable that your files are kept up-to-date 24/7. The same effects can also be applied here easily from the offices, also on the other side of the world so that the entire report also reflects more. In the same way, you also get periodic reports on the screen on a daily basis.

The only setback that can be seen when using these accounting payroll administration services is the need for training for staff to fully exploit the benefits and understand the system. The costs are often a disadvantage because with these services you actually do ten people with one or two employees.

For small business owners, it is important that they have control over every aspect of their business, including payroll administration. However, not everything can be managed on its own or it can shift your attention to activities that hamper the growth of your company but are important.

Payroll is such a function of a company, which not only brings many challenges but if it is not handled properly, it also brings fines. For this reason, payroll outsourcing for small businesses can prove to be very beneficial. Let's discuss some of the salary challenges facing small businesses and see how outsourcing this feature can benefit the business.


  1. It is very important that employee satisfaction is high. Delays in remuneration due to public holidays or for any other reason may be a reason why employees may not be satisfied.

Solution: this payroll challenge can be dealt with by outsourcing your payroll to an outsourcing supplier. If there is a chance that such delays occur during payment, they can give you a predetermined schedule of when the employees are paid in such circumstances.

  1. Time management and recording is another challenge that they often face. They often resort to methods such as timetables, for recording the working time of employees. Such methods are often inconsistent and can cause problems when it comes to paying employees.

Solution: One of the most important advantages of outsourcing the payroll to a contracting company is that it tracks the time of employees with the help of an online time clock or time management software. These are much more accurate compared to manual methods adopted by small businesses. As a result, there are fewer opportunities for differences and problems that arise at the time of payment with respect to time.

  1. Tax-related payroll challenges that small businesses experience, calculate compensation insurance, do not impose correct taxes on salary, payment of taxes and timely declaration of return. If there are errors or mistakes in these processes, chances are that you will eventually have to pay fines.

In addition, the IRS has focused its efforts on increasing tax compliance by small businesses, which makes it important to know the triggers of payroll tax control. There are statistics that say almost 40% of small businesses are almost $ 845 after IRS fines.

Solution: avoiding such fines and the timely handling of all the above processes is one of the most important advantages of outsourcing the salary functions. Outsourcing suppliers have experts who are well informed about federal, state and local wage tax. Their expertise minimizes the risk sanctions.

In conclusion, small business owners must master the art of entrusting responsibility and control over crucial tasks, such as payroll administration to experts. As your business grows, managing and maximizing your business becomes more important. That is why payroll outsourcing and other outsourcing of HR processes can prove to be very beneficial for small and medium-sized companies.


Salary processing is a complex and time-consuming, critical business task. That is why many employers decide to outsource the job to special payroll administrators with the latest technical tools and to enable their staff to add value elsewhere in the company.

Time and cost efficiency

Outsourced payroll can be very cost-effective and offer additional operational benefits that save time and money. Alison Dodd, managing director at HR and payroll service provider Moorepay, said: "Consider the costs of employee wages and benefits, national insurance premiums, the salary software price and maintenance costs, and the time costs for training and processing. not to mention the extra costs of stationery, computer equipment, etc. "Given this, outsourcing can be considerably cheaper. Hiring internally costs £15,000 while outsourcing the same rental costs only £800."

Obligations for automatic registration

Almost all employers now have to provide workplace pensions for their staff through automatic registration and the automatic registration process. Some lower-paid or part-time employees may not be eligible, but those with variable pay may be eligible for entry and exit. One of the most important benefits of payroll outsourcing is the peace of mind that an employer brings with him in the knowledge that his payroll is correctly calculated and processed.

"As soon as organizations hire people, the payroll administration becomes complicated," says Dodd. "The calculations alone are very complex and need to send they real-time information to HM Revenue and Customs, and face the consequences if they miss the deadline or get it wrong, which is usually the case. In case of an outsourced payroll, everything is provided by the payroll provider, whose responsibility it is to fully inform the employer of any upcoming changes. "

Size does not matter

Some employers may wonder whether they are large enough to justify outsourcing. But it is not really a matter of size when considering outsourcing of salaries, but of looking at the business benefits that can be derived from it, says John Ovington, sales and support director at Carval Computing.

"Take business continuity, for example, imagine it's a holiday and being an employer struck by illness or another unexpected absence, or that its technology fails on that critical afternoon." What does it do about the payroll while nobody thinks payroll is mission critical, in fact, it is true that employers do not pay staff on time. An external resource specializing in payroll administration means that it is not affected by absence because it has dedicated employees and resilience is built into its IT systems."

Sometimes, however, the size of an organization can influence the decision of an employer to keep the payroll administration in its own hands, says Richard Freke, founder of H2R Selection, specialists in the field of outsourced personnel for HR and employment advice.

"Among the small and medium-sized companies we work with, it is often companies with 10 to 150 employees who benefit greatly from outsourcing of payroll," he says. "However, when employers outsource the payroll, there is the potential to lose that personal touch by having someone in-house to discuss any questions from the payroll, and some customers with more than 150 employees find it useful from the point of view of employee satisfaction and commitment to keep the payroll administration in. Supporting companies to make the right decision based on the current organization size and the strategic direction of the company."

Cost efficiency

As far as costs are concerned, many employers find outsourcing of salary administration cheaper and less time-consuming than internal implementation. "It eliminates the need for specialized staff and companies can save in other areas, such as the cost of wage fragments, stationery and delivery, and shipping".


• When a company has its own payroll department, this means that they have to manage a payroll department and have to accept accounts, but that the paid pay services mitigate these costs. It also saves the boring work of calculating the payroll.
• The money and personnel invested in an internal payroll can be used in other productive works
• It can help companies keep track of their earnings and expenses
• Helps the company to keep a detailed overview of the payrolls, which is important for every company
• It streamlines the entire salary management in the hands of experts in that area.
• They give the company excellent results with high performance
• Salary administration means that access is granted to private sensitive information of employees to a third party, which is not safe to do
• Employees may not like to outsource the payroll administration outside the company because they value their privacy
• Not all outsourcing deals are successful, even if high-cost effectiveness is very high.
• Your profit may not be worth the money you spent if you do not hire an inexperienced company
• To threaten privacy
• The lack of direct control over the company's payroll services


Many reputable companies outsource the payroll, but you must do your research to ensure that the company you choose has a good reputation. Check to ensure that they have a high record of customer satisfaction. You can also check with the BBB whether complaints have been filed against the company that you are considering to employ for your payroll administration.

If you look at the advantages and disadvantages of outsourcing your payroll administration, you will see that this reduces the burden of your Human Resource department and that the payroll is carried out correctly because the outsource company specializes in payroll administration. Choosing a qualified and reputable company will also protect the privacy of employees.