The Guide to Payroll Outsourcing And Reasons Why You Should
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7 in 10 SMBs say payroll management is a burden. They have a point; managing payments, taxes, and deductions takes a lot of time. No wonder half of all businesses are outsourcing payroll!
That being said, how do you outsource payroll the right way? How do you pay people on time, keep data secure, and eliminate expensive mistakes - all while staying compliant?
We’ve got the answers!
At MultiplyMii, we’ve helped 200+ brands with BPO: business process outsourcing. We know exactly how to outsource payroll - and why you might want to do so. And on this page, we’ll share everything we know - starting with…
What is Payroll Outsourcing?
In terms of operations, payroll outsourcing is the delegation of payroll activities to a third-party service provider. It can include salary calculations, tax deductions, and more. 45% of small businesses outsource their payroll functions
As an industry, payroll outsourcing is a growing market of payroll outsourcing providers and buyers. The total volume of their transactions is expected to grow from $79.9 billion today to $128.53 billion by 2028.
The Process of Payroll Outsourcing
Discover how payroll outsourcing can help your business operations. We’ll break down the typical process step by step, providing clarity and insights for this service.
Step 1: Establish terms
Define the scope, the contract duration, and the pricing structure. Both parties need to have a clear understanding of their responsibilities and expectations.
Step 2: Data collection
Once the agreement is in place, the outsourcing provider collects all necessary employee data. This includes information such as hours worked, overtime, and deductions.
This data is critical to ensure that employees are paid correctly and that tax and benefit calculations are accurate.
Step 3: Payroll processing and legal compliance
The provider calculates employee salaries, taxes, and benefits based on the agreed-upon criteria. This involves applying tax rates, considering any deductions, and factoring in bonuses.
The provider must also ensure compliance with local labor laws, such as minimum wage requirements and overtime regulations.
Step 4: Payment management
Finally, the provider ensures that all payments are made accurately and on time. This includes issuing paychecks or direct deposits to employees. It also involves remitting payroll taxes to the appropriate government agencies and distributing employee benefits or contributions.
The provider must also maintain records for future reference and auditing purposes.
Payroll outsourcing is a strategic journey that enhances your business operations. Each step ensures seamless management, starting with terms and data collection, progressing to payroll processing and compliance. This results in accurate payments and a strong commitment to financial integrity and business growth.
Different Types of Payroll Outsourcing
Outsourcing payroll can happen in two ways: hiring a company to handle all payroll tasks or bringing in external payroll staff to work within your company.
Hiring an outsourcing payroll services company
When outsourcing payroll services, you let a third-party company handle things like calculating employee pay and taxes. They're experts in this area and use special software to make sure everything is done correctly.
There are various types of payroll outsourcing services available to businesses. Some offer comprehensive packages of services, including:
- Calculating and distributing employee salaries
- Handling tax filings
- Managing benefits programs
- Providing human resource support
Other payroll service providers specialize in specific areas, such as tax compliance or benefits administration. These providers may offer standalone services that can be customized to meet your business needs.
If you're looking to get immediate assistance and trim down your costs, then outsourcing would be a good fit. However, there is a better option if you're looking to expand your organization's long-term capabilities and resources.
Hiring a remote payroll specialist through an offshore staffing company
You can partner with a remote staffing company if you want to hire your payroll staff without adding more to your overhead costs. These hires become part of your team and manage all payroll tasks. This gives you more control and lets you customize your team, but you'll still need to monitor their work.
For example, MultiplyMii offers remote staffing solutions for businesses wanting to hire remote accounting and financing professionals. We can help you save as much as 80% on costs! Check out our FREE salary guide for more information.
In a nutshell, outsourcing payroll services means getting help from an external company, while outsourcing payroll staff means hiring dedicated experts to manage payroll within your company.
Choosing the right type of solution depends on the needs and priorities of your business. Consider the size of your business and the complexity of your payroll requirements. Think about the level of control and oversight you wish to maintain. They should align with your budget and business objectives.
7 Reasons to Start Payroll Outsourcing Today
Now, let's dive into seven reasons you should consider outsourcing your payroll staff today.
Reason 1: Focus on core business functions
Outsourcing payroll allows you to redirect valuable time and resources to the core functions of your business. According to about 40% of small business owners, taxes and bookkeeping are the most time-consuming tasks of owning a business. By freeing up your staff from payroll tasks, they can concentrate on contributing to your growth and success.
For example, your HR team can focus on talent acquisition, employee development, and fostering a positive work environment. Your finance team can prioritize financial planning, budgeting, and strategic decision-making.
By outsourcing payroll, you can ensure that your employees are working on tasks that align with their expertise and contribute to the overall success of your business.
Reason 2: Reduce operational costs
According to Jana Kelly, startups and small businesses can save time by letting an outsourced provider handle routine financial tasks.
Companies lower operational costs associated with hiring and training payroll staff. Additionally, outsourcing eliminates the need for expensive software and IT infrastructure.
When you outsource payroll, you no longer have to bear recruitment costs. Instead, you can rely on the expertise of a dedicated payroll service provider. This saves you money, time, and effort in finding and retaining qualified payroll staff.
Reason 3: Avoid payroll management mistakes
Attempting to manage payroll in-house can lead to costly errors and miscalculations. Based on a 2022 study by Ernst & Young, companies tend to make around 15 payroll errors each payroll period.
Payroll is complex and ever-changing. It has numerous regulations, tax laws, and reporting requirements to consider. Managing it in-house requires understanding these complexities and changes.
Unfortunately, even minor errors in payroll processing can have significant consequences. This can cost you financial penalties and damage to employee morale.
By outsourcing payroll, you can rely on the expertise of dedicated professionals. They have the skill set to manage payroll, ensuring your employees are paid correctly and on time.
Reason 4: Stay compliant with regulations
Labor laws and tax regulations are constantly evolving. Staying up to date with these changes can be challenging for businesses. But, outsourcing payroll ensures that experts handle compliance at all times.
Payroll service providers deeply understand labor laws, tax regulations, and reporting requirements. They continuously monitor changes and ensure your payroll processes are compliant. This reduces the risk of penalties and legal issues.
Have peace of mind knowing that your payroll processes are in the hands of professionals. This allows you to focus on your business without constantly monitoring payroll regulations.
Reason 5: Access to latest payroll technology
Payroll service providers use payroll software to streamline your payroll processes. By outsourcing payroll, you can access these valuable tools without spending.
Leverage the expertise and technology of your payroll service provider. These providers have state-of-the-art payroll software they regularly update. Partnering with them allows your business to enjoy the latest payroll technology.
Reason 6: Scalability and flexibility
As your business grows, so does the complexity of your payroll requirements. Outsourcing payroll allows you to scale your payroll processes for your changing needs.
Managing payroll in-house can be challenging when your business experiences growth. Hiring and training more payroll staff or reallocating resources can be time-consuming and costly. If you downsize, you may be left with excess payroll capacity.
Outsourcing payroll allows you to adjust based on your business needs. This scalability and flexibility will enable you to manage your payroll processes efficiently.
Reason 7: Enhanced data security
Data security is a crucial consideration for payroll processing. According to Gartner, 2022 has seen increased cyberattacks originating with third-party affiliates and services.
A reputable service provider secures sensitive employee data. These providers put security measures to protect against data breaches and unauthorized access.
Payroll data contains sensitive and confidential information. It includes employee personal details, salary information, and bank account numbers. Protecting this data is essential to maintain the trust and confidence of employees.
Payroll service providers are committed to maintaining the highest level of data security. They install industry-leading security measures. These may include encryption, firewalls, access controls, and regular security audits. With this, your employee data is stored and processed in a secure environment.
In conclusion, payroll outsourcing offers many benefits. These advantages allow businesses to make informed decisions and streamline their payroll processes.
Enhance Your Accounting Team With A Skilled Payroll Specialist
Want to optimize your workforce and unlock new opportunities for your business?
Look no further than MultiplyMii, your trusted partner in remote staffing.
As a leader in this field, we bring you a flexible and efficient way to harness top-notch Filipino talent.
Supercharge your accounting team! Bring a remote payroll specialist on board minus the high expenses. After all, the Philippines boasts a highly skilled labor force and is home to 200,000 CPAs.
MultiplyMii has a proven track record of connecting businesses to exceptional remote Filipino professionals. We do the sourcing and vetting until you onboard the right person for the job. With our extensive network, find the perfect fit for your unique needs.
Ready to explore the possibilities?
Contact us today to learn how we can transform your business through remote staffing.
