Running Payroll: In-House vs Outsourcing
28 March 2017
Deciding whether or not to keep your payroll operations in house can have quite a big effect on your company. It can depend on a number of factors such as staffing, time available and the level of complication your payroll incurs.
There are plenty of things to think about when making this choice. It’s important that you consider each factor in depth when coming to a decision.
Here are eight things you should think about when choosing to either keep your payroll in house or outsource it.
How frequently do employees get paid?
Are your employees salaried on a weekly, bi-weekly or monthly basis? Do different employees get paid at different intervals? If this is the case, you might have to send batches of pay to a third party on a more regular basis, meaning that keeping your payroll in house might be easier and less complex. If all employees get paid at the same time monthly, it would be straightforward to outsource.
How complicated is your payroll?
How many benefits, deductions and allowances does your company have? If there is a complicated payroll, the amount of data you’ll need to process before creating payments will take up the most time in the process. In a lot of cases, companies will be asked to make all the gross to net calculations themselves, before sending them to a third party payroll administrator. If this is the case, you could save money by keeping your payroll in-house.
How often do you have to make amendments?
If you are frequently making last minute adjustments or adding pay cheques, it might make more sense to keep your payroll in-house as outsourcing companies may not be able to make amendments quickly, or may charge more to have them actioned. With an in-house system, it could be easier to make last minute adjustments.
How important is speed and security?
Outsourced payroll providers are literally paid to make sure a good service is provided and would lose clients if this was a continuous issue therefore they have very strict processes in place to ensure mistakes are minimal if at all. Most payroll outsourcers have sophisticated software to detect any fraudulent activity and have to work to very regulated processes in order to meet compliance requirements. You’re left to focus on running your business knowing your payroll obligations are dealt with correctly, efficiently and lawfully.
How much control do you want?
In-house payroll gives you far greater control over the process, and maintains a higher level of flexibility. However, if you outsource the payroll process, you no longer have to dedicate time to it or worrying about it. Some of the elements will still be required, but on the whole, it’s one less thing on your list of priorities.
Do you want to keep a record of all transactions?
For some companies, being able to audit their payroll is extremely important. You can achieve auditing reports on both in-house software and from a third party. However, it is likely to incur a cost from an outsourced payroll administrator.
Do you already employ someone who understands payroll and statutory reporting?
Even if you rely on payroll software, someone still needs to understand how to work the software and how to spot any errors. Keeping track of all of this is a specialised job function, especially when it comes to monitoring compliance. If you don’t have someone with this particular knowledge and skills, it is far safer and more reliable to outsource your payroll to avoid potentially hazardous mistakes. In addition, if this is only one person within the company you are leaving yourself open to a gap in knowledge if this person was to move on to another company.
Can your company support an in-house payroll function?
It might be your preference to keep payroll in-house, but do you have the resources to support it? At the very least, you will have to have speedy and reliable IT access. You would also have to investigate which software would be the most practical in terms of being user friendly and up to date. You will also need a member of staff who is skilled enough to utilise any software efficiently and effectively. If none of this is the case, outsourcing is the obvious solution.
The decision to outsource your payroll or keep it in-house is not an easy one, but it is essential to the swift and productive running of a business.
I have several highly skilled and dependable payroll professionals ready to be employed to suit your needs and I would be more than happy to talk you through your options. For more information, click here to see my details.
Written By Eilidh Black