Why Payroll Is One Function You Should Outsource
A non-core function is one that is not a profit center (meaning, you don’t charge customers for it). A non-core function may be essential, but doesn’t differentiate your business strategically from competitors.
In most businesses, administrative and back-office activities such as payroll processing are non-core functions.
As such, they are potential candidates for outsourcing.
But the question business owners and managers want answered is: what do you actually gain from outsourcing payroll? Is it worth all the time and effort to investigate and identify appropriate outsourced service providers? Then there’s the work involved to transitioning the function outside to the third party service. Do the benefits of outsourcing outweigh that effort?
Below are several long-term advantages to be gained from outsourcing your payroll to Multisoft Solutions:
Ideally, outsourcing achieves ten main goals:
- It allows resources to focus more on your core business.
- It gives you access to more technology and expertise to perform payroll well.
- It reduces your costs.
- It ensures confidentiality.
- It ensures compliance & Avoid GRA Penalties.
- Outsourcing cuts complexity.
- Aids effective management decision making.
- Alleviate Pain & Free Up Time.
- Leverage outside Payroll Expertise.
- Avoid Payroll Knowledge Walking Out the Door.
Let’s examine each of these benefits in more detail, and what they mean.
1. Focus Better on Your Core Business
Payroll is one of those critical functions that may not directly increase revenue. But carried out poorly, it can put your business in a world of hurt. And most of all, it can sap internal time and attention away from core activities.
Businesses have to comply with a wide range of laws when it comes to employees — from income tax, to labour law. It takes considerable time and attention to detail to deal with them.
There are the obvious legal requirements, such as tax and SSNIT reporting and remittance. There are requirements around withholding taxes from the employee’s pay, and also calculating the employer’s portion of taxes. In some cases there are electronic filing requirements. You need to also know when to file — at the GRA and SSNIT offices.
Taxes, though, are just the start. Then there may be new-hire and terminated staff reporting requirements, and workers compensation structuring.
2. Get Access to Expertise and Technology
Another reason to outsource is to get access to expertise and technology.
Compliance with the pensions Act and the tax legislation can be a time consuming task that diverts resources from core activities to non- core activities. To diversify this risk, businesses outsource their payroll functions so they can concentrate on the core activities. Payroll can also be complicated by the difficulties in understanding the tax implications of the various compensation items in an employment contract.
Just as important as expertise is new technology. Employers today rely on technology to operate more efficiently. As a business grows, employers have more employee records to keep and also need more reporting. Lack of technology becomes a hindrance to scaling for growth of the business.
Employees also expect technology. Employees today want options like direct deposit and self-service access to their payroll information. Employers that aren’t able to provide such options may be at a competitive disadvantage.
On top of that, the explosion of mobile device usage is ushering in a new level of technology expectation. Mobile use is still nascent when it comes to payroll, but it’s growing at a rapid rate.
While employers are using mobile devices to look at certain reports and look up information, such as how much money they need to have in the bank on payroll dates, Employees also use mobile apps to check their own records.
3. Cost Reduction
Outsourcing payroll can also assist with cutting costs and limiting risks. On average, businesses are overpaying employees by about 4 percent because of differences between the employee’s time and an accurate time record.
We offer customized payroll services, with the potential to save your business 50% of costs as compared to an in-house payroll.
When we take responsibility for processing your payroll, you no longer have to purchase and install your own payroll software. In addition, the associated costs of annual license fees, consulting fees, training and seminars will be avoided, and it also saves on the cost of employing a payroll administrator.
4. Ensuring confidentiality
It is crucial that payroll data is well protected, breaches can have disastrous effects on any business, and it is important that strict internal controls are put in place to prevent them. One of the big advantages of outsourcing payroll is that the information resides outside the company and is thus less likely to be hacked.
5. Ensuring compliance & Avoid GRA Penalties
It is vital that an organization’s payroll system comply with legal frameworks as well as other industry-specific requirements. There has been increased pressure on companies to adhere to’ good corporate governance’ and there is a high price to pay for non-compliance
The GRA has confirmed that, one out of every five organizations pay a penalty for non-compliance either as a result of late filing or wrongful calculations of taxes.
Most payroll outsource service providers guarantee tax refunds arising from noncompliance , ensuring that there will be no penalties and when they occur, take responsibility for the penalty. In many instances, this cost saving immediately justifies payroll outsourcing .
6. Outsourcing cuts complexity
Legislation governing payroll is becoming more complex with every passing month and it is becoming increasingly difficult to fully comply with all the requirements.
The resources required to effectively run a compliant payroll operation are therefore often beyond the financial capabilities of many companies, and even those that can afford it find the task too complex.
7. Alleviate Pain & Free Up Time
Payroll is a headache in the best case and a nightmare in the worst case. Business owners that outsource payroll eliminate a tiresome source of personal pain. Payroll processing is a time-consuming process. Outsourcing payroll can free up staff time to pursue more important value-added and revenue-generating activities.
9. Leverage outside Payroll Expertise
Most business owners and controllers don't have time to keep up with constantly changing regulations, withholding rates, and government forms. By outsourcing payroll, businesses can take advantage of expertise that is not available in-house.
10. Avoid Payroll Knowledge Walking Out of the Door
If your payroll schedule officer or controller gets a new job, they will walk out of the door with their knowledge of the payroll process and how you do it. Using an outside service eliminates that business risk.
Tips for Choosing an Outsourced Payroll Provider
However when it comes to payroll, there are other points to consider, too:
Security and Reliability of the Provider
You’re giving your payroll provider the names, addresses, social security numbers, and bank account numbers of your employees. You’re giving a power of attorney to make filings on your behalf.
Go with a provider that is financially strong with good controls in place.
Otherwise, you could find your company in a bind..
Track Record Serving Businesses like Yours
Does the payroll provider have a strong track record of serving businesses your size? Is the provider experienced in your industry?
Complementary Service Offerings
Consider the broader services you may need as your business grows, such as assistance with HR Services and benefits accounting. Will the payroll company be able to provide these?
Regulatory Compliance Capabilities
Does the payroll provider have the resources to keep up with the burgeoning laws and regulations around employment, labour issues and taxes?
Evaluate the payroll company’s technology, including its mobile readiness. Is the payroll company investing in new technology? Can they keep up with technology as demand grows from the employer and employee?
Can your accountant get easy access to your payroll and related records for purposes of reconciliations and tax filings?
Our service coverage includes:
- Pay computations – determines gross and net pays and other deductions
- Generation of payslips and transfer details
- Generation and filing of all payroll related statutory returns
- Generation of payroll related management reports
- Advisory on tax implications of remuneration packages
- Responding to queries from the GRA
- HR document management
- The all new Employee Self Service experience
In conclusion, payroll is often regarded as a cog within the wheel of business. However, it’s rarely a glitch-free system. It is complex, fraught with challenges and, although it does not contribute directly to the bottom line, it is indispensable.
Summary of service offering
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