Payroll Outsourcing: Why Outsource & What Are the Benefits?

By: Flaka Ismaili    April 14, 2022

outsourced payroll

This prevents the processor from being able to accomplish other daily tasks and functions. Those unfamiliar with payroll may think it can be easily generalized to the action of “pushing buttons,” but as payroll professionals know, this isn’t true. Payroll functions such as entering payroll figures, handling employment staffing changes, and keeping up to date with new and updated laws or regulations can be daunting.

  • Finally, the client shares all relevant information the provider needs to complete the payroll functions it will assume.
  • Payments must be withheld by the provider before applicable taxes are withheld.
  • Outsourcing payroll means that companies won’t have to worry about running into this risk as their payroll provider will always have a dedicated staff on hand to ensure year-round payroll continuity.
  • The proposed remuneration shall be suitable and sufficient to predispose the Board of Directors to lead the Company to achieve both short-term and long-term goals, without making excessive remuneration payment.
  • When you work with a third party, their experts deal with the stress and hassle of the payroll process.

In some situations, especially with Do-It-Yourself (DIY) online solutions, a payroll company will charge a fixed rate per month that covers a set number of employees or a range such as $65 for 1-9 workers, $125 for and so on. Charging fees per pay frequency is the most common way payroll companies charge for their services. That means however often you pay employees (weekly, bi-weekly, semi-monthly or monthly), you’ll be charged for the number of employees you pay each pay period. In most instances, the fees are made up of a base fee and a charge for each employee paid. In Deloitte’s 2018 survey, respondents indicated that manually entering or loading inputs is the most time-consuming aspect of processing each payroll.

ADP works with employers to determine the right payroll setup for their business, whether it’s a start-up company or an international enterprise. In addition to being challenging, payroll is also time-consuming and overwhelming. It takes time and dedication to manage global payroll, regardless of how many employees you have. Research shows that 26% of small businesses spend more than 3 hours a month processing payroll. Consequently, payroll outsourcing allows organizations to focus on other more important tasks by removing the payroll burden from their plates. For a small company that cannot afford to hire a payroll administrator, payroll can be all consuming.

How to choose a provider for outsourcing payroll?

This approach is good for businesses with fairly predictable payrolls that don’t have a lot of changes or extra payroll runs. If this sounds like you, you can expect to see individual employee charges that run from $1.50 to $5 per employee and base fees per pay period between $20 and $70. So that means you would pay about $140 a month based on a fee of $3 per check and a base fee of $35.

Plus, when comparing the costs of hiring in-house personnel to manage payroll versus hiring an outsourced company, outsourcing is almost always the better option financially. If your payroll is currently conducted in-house and runs smoothly, you might think that it’s a case of “if ain’t broke, don’t fix it”. However, as the benefits above demonstrate, a good payroll partner has the ability to take your employee payroll and make it even better, whether through cost efficiency, payroll performance, or making informed decisions based on expertise. You’ll also be able to get personalized advice, training, and support so that you can tailor your payroll services to the specific needs and demands of your business and workforce.

This act of hiring away business functions, or “outsourcing,” is now recognized as a widely applicable business strategy, even if its ethical implications and socioeconomic, political and cultural consequences are often overlooked. Its financial value as a near-term, cost-cutting measure has been boosted dramatically by globalization, which opened access to international labor far less immediately expensive than America’s domestic workforce. The term “payroll” can describe both a company’s list of employees to be paid and also the total amount an employer owes in wages and salaries. In the modern business context, however, payroll most often refers to the process of paying employees or to the entities responsible for carrying this out. It also includes managing information relevant to the tax process such as health insurance and workers’ compensation claims. This guide is intended to be used as a starting point in analyzing an employer’s payroll obligations and is not a comprehensive resource of requirements.

outsourced payroll

An outsourced solution will deliver peace of mind and free up time in your company, ultimately saving you money and reducing compliance risk—and helping you deliver the payroll experience your employees deserve. In today’s modern age, artificial intelligence (AI) technology plays a big role in outsourced payroll processes. The efficiency and data analytics capabilities of this technology makes it a great tool for automating and streamlining the repetitive and tedious tasks that are involved in key payroll functions. Plus, it can provide advanced reporting and analytics on-demand to help businesses make informed decisions regarding payroll and workforce planning. When you outsource payroll, you can simplify these processes and streamline all your employee and payroll information. Although business owners are ultimately responsible for meeting payroll accuracy and tax filing requirements, having a provider on hand often helps them feel more confident about staying up-to-date on regulations.

Common time-consuming payroll responsibilities

Changes in reporting requirements and legislative compliance should be taken into account. It’s challenging for small businesses to keep up with the complicated changes in tax laws and standards. Escalation efficiency – another pain point is the difficulty faced in escalating an issue to higher levels in the payroll outsourcing vendor. Escalation procedures in the vendor company can be slow and inefficient, and the issue may become a crisis before help can be engaged. Organisational change – company strategy changes; what worked for you last year might not necessarily be right for next year.

outsourced payroll

Partnering with a provider that offers payroll management outsourcing services can bring value to your business. The benefits of outsourcing payroll functions include time Debits and Credits Explained: An Illustrated Guide savings and reduced compliance risk. Consider the advantages and disadvantages of payroll and benefits outsourcing for your organization before you make a decision.

In a nutshell, Multiplier simplifies complex payroll and tax payments for companies, saving a great deal of time and resource use at large. The platform makes it easier to keep track of payments and approve and pay employees working for firms from anywhere in the world. On the other hand, our team of professionals handles legal compliance, taxes, and necessary payroll deductions, which can be challenging when you employ a global team. A payroll outsourcing company will ensure that the employee’s paychecks are credited on time, and the necessary deductions are credited to the respective government departments.

KPI and SLA monitoring dashboards help keep track of both supplier and in-house service deliverables. To find out more about outsourcing the payment of independent and international contractors see How to Increase Revenue through Contractor Management Outsourcing. When a company keeps everything internal, these types of risks tend to go down. However, partnering with an EOR platform such as Multiplier, the pricing typically ranges between $40 to $300 (depending on the type of employee you onboard), or opt for additional plans that start from $20 per month.


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Whether it’s calculating payroll amounts, generating in-house reports, preparing and remitting state and federal payroll taxes and returns, or simply printing, signing, and distributing paychecks, the demands on your time can be costly. Outsourcing companies remain up to date on the latest technological innovations. As a result, outsourcing payroll eliminates the cost of software maintenance and upgrades.

Payroll services often work with payroll automation, which means less human intervention and thus less room for errors. Plus, payroll is their core business activity and a good payroll service provider is a real expert in all things payroll. And since less mistakes in payroll means happier employees, the benefit for the business is real. The main advantages of payroll outsourcing are cost and time savings, reduced compliance risks, fewer payroll errors, better data security, and improved data visibility.

  • Even if these errors are caught before they are submitted, they can still cause countless hours of reprocessing employee paychecks and tax returns.
  • Before meeting with a potential provider, prepare a list of questions about the services you are considering.
  • External factors – regulations, withholding rates, new forms, payroll laws – frequently change and affect your ability to process a correct payroll.
  • Providers vary according to how many different territories and currencies they can cover, the technology and security they have in place, their pricing strategy, and much more.

Having your payroll in-house can be challenging, especially for smaller businesses or companies that do not have HR and accounting professionals as their staff. Payroll outsourcing can help companies save the costs of hiring new employees. For example, if you want to have some degree of support or assistance, many software solutions don’t offer that as part of the service. So if you want a relationship with your vendor or an option for call in/call out service, you may be better off with a payroll company that allows you to just report your employees’ hours and they handle everything else. Working with an outsourced payroll company can help streamline processes and boost productivity – freeing up finance, payroll, and/or HR team members to focus on more strategic projects. All Employees are the most valuable resource in driving the Company towards its objectives, thus, they are the most important factor contributing to the corporate success of the Company.

Contact Horizons for Payroll and Global PEO Solutions

However, challenges still arise when it comes to processing payroll in various countries. A payroll outsourcing platform follows several steps when processing payroll for their client’s employees. Another way to ensure the services provided are good is by requesting customer references to whom you can talk.

Even if these errors are caught before they are submitted, they can still cause countless hours of reprocessing employee paychecks and tax returns. Despite identifying these tasks, Paychex found that 39% of businesses do payroll manually — 23% of which use a desktop solution and 22% use an online solution — yet only 17% would consider changing from a manual to an outsourced solution. Outsourcing payroll to a provider allows you to take back valuable time in your workday. You’ll be more productive and have time to focus on more strategic initiatives for your organization. That’s why payroll outsourcing is very popular among organizations that are expanding globally.

You should be able to access this on-the-ground, real-time expertise whenever required, so that you are always up to speed with the latest regulatory changes happening in country. Again, this can lead to poor visibility and blurred lines of responsibility, with third-party providers potentially playing the ‘blame game’ when things go wrong. Delivering this on a global scale requires specialist payroll expertise in each jurisdiction where a company has employees.

The Covid-19 pandemic has made remote and hybrid working the norm for many companies, and prompted people to reevaluate their work–life balances. In many ways, it is now easier for employees to move on if they are not happy. A smooth payroll process contributes to employee engagement and satisfaction by always ensuring people get paid accurately and on time, and by enabling easy, secure access to guidance and documentation. Before meeting with a potential provider, prepare a list of questions about the services you are considering.

Global payroll can be challenging and complex for international organizations. Paying international employees requires compliance with local employment and payroll laws. The complexity of making payments overseas is eliminated with global payroll platforms. Platforms like these usually have a global network and are experienced in international transactions. The payroll outsourcing industry is expected to expand both domestically and internationally in 2022. Different companies will evaluate a provider based on different criteria, but they must all ensure that employee data is adequately protected and that relevant regulations are followed.