Payroll is an increasingly complex process, which is just as indispensable for business administration at companies as bookkeeping, tax consulting or audit.
Company owners and managers typically decide on outsourcing payroll for the following reasons
Cost cutting
In the case of small and medium-sized enterprises, companies have a good chance of saving costs if they decide to outsource payroll. Costs fall because the salary of the payroll administrator is no longer charged to the company. The company does not have to ensure cover in the event the person is on holiday, is ill or dismissed, like in the case with their own employees. No office equipment has to be provided, such as desks and computers, no office has to be rented for the payroll administrator, no payroll software is needed and there are no training costs. On annual basis these costs can be significant.
Expertise
Small and medium-sized enterprises often do not have the time and capacity to keep track of the frequent changes in law and integrate them into their systems at the right time. If payroll is handled internally, the appropriate training of staff and keeping their knowledge up-to-date represent huge costs. When outsourcing payroll, the payroll company has the necessary expertise, qualifications, experience, practice and wide-ranging knowledge. A good service provider always monitors the changes in law, notifies the company of the changes, and applies them at the right time and place. It provides advice and makes proposals for decreasing and optimising costs. Since a company specialised in payroll has much wider experience, during tax inspections any penalties, fines or sanctions can be minimised or avoided altogether.
Increased security
Payroll is a complex and potentially risky business. When carrying out payroll internally, risks can arise in respect of the secure and encrypted storage of salary data. Due to the confidential nature of incomes, using and ensuring sophisticated security systems is important in internal systems, so that unauthorised persons and employees cannot access secret and confidential information. Guaranteeing this enhanced security requires a lot of attention and energy on behalf of the management. With outsourcing, risks can be minimised.
Technical costs
Managers always ask whether they are using appropriate payroll software, and whether they are applying current rules during their internal payroll or not. The use of payroll software that is reliable and tracks legal changes in an appropriate and timely fashion is a costly investment and involves continuous monitoring and maintenance fees. Payroll outsourced to the right service provider constitutes a guarantee that the applied payroll software is up-to-date and that the sources of errors derived from an inappropriate technical background are excluded.
Saving time
Payroll requires time and a lot of administration. Company managers and owners often do not see what types of task have to be performed to deadlines during payroll activities. The majority of these tasks have to be performed by the service provider when outsourcing payroll. If these activities are outsourced, managers save time and can focus on a different business line.
Reassurance
When services are outsourced to an experienced company with a high degree of professional competence, payroll tasks can be performed quickly, precisely and without errors. Managers can focus on other tasks, and do not have to worry about payroll activities.
It is not good for management to make a decision on outsourcing payroll simply based on the price per person. It has to be reviewed what type of payroll and other tasks are included in the cost per person, and what other services may arise as separate costs. Costs can be planned better and are more predictable after outsourcing. When the laws are complied with the quality of the work improves, and the storage of data becomes highly secure. After outsourcing, the management may receive proposals and recommendations resulting in possibly significant savings for the company.
