What To Consider When Outsourcing Payroll

What To Consider When Outsourcing Payroll

Outsourcing is the new managerial hack. If done correctly, it could save your business a lot of time and money.

For businesses to run smoothly, several activities need to be done. Some activities are crucial and need to be handled on a day-to-day basis to generate revenue. However, some activities are secondary, and even though they’re important, they only happen once in a while.

Payroll processing happens to be one of those secondary, but important activities in a business.

For startups or even standard businesses, having a separate payroll processing department means the business will have to spend extra funds on hiring a team of full-time professionals. Money is a scarce resource, and it would have been even better if some of that money was used to grow the business.

An outsourced payroll processing team is much cheaper and can save a lot of time, especially for a business with a considerable number of employees spread across cities, states, or even countries.

It’s the new “managerial hack” that business owners have discovered and are now tuning their business structures to accommodate.

There are several ways you can outsource payroll. You can outsource payroll by contracting a payroll professional or hiring the services of a third-party online payroll processing system.

What are the benefits of outsourcing payroll?

Continue reading to find the answers to that question and more on what to consider when outsourcing payroll.

Benefits of Outsourcing Payroll

As mentioned earlier, outsourcing payroll comes with several benefits that some even consider it a “managerial hack.” Below are some of the main benefits that come with outsourcing payroll.

1. Low Cost

This probably the main benefit of outsourcing payroll since it has a direct bearing on a business’s running costs.

Low Cost - What To Consider When Outsourcing Payroll

Hiring a dedicated team of payroll professionals means you’ll have to spend money and time searching, interviewing, and hiring people to do the work for you. Not to mention the fact that these professionals will be full-time employees and will also be expecting benefits and insurances.

The cost of hiring payroll professionals will skyrocket even higher if you consider training. The cost of hiring even the cheapest of employees will eat up a lot of money (roughly $3500 in turnover costs, both direct and direct).

Outsourcing payroll will save your business a lot of money since the processionals contracted aren’t full-time employees.

In addition to that, you can easily find payroll processing service providers without launching a costly hiring campaign.

2. Time Management

Did you know that small business owners spend up to 40% of their time on non-revenue generating activities like payroll processing and HR management?

Time Management - What To Consider When Outsourcing Payroll

Time is of crucial importance to startups and small businesses. In such businesses, the owner is usually the one in charge of payroll processing.

As a business owner, you already have other roles and duties in the company. In as much as payroll processing is important, it doesn’t help in growing the business. In fact, processing payroll on your own increases your chances of making mistakes.

Mistakes in calculating payroll tax will cost your business a lot of money in penalties. It’s even harder now that tax compliance legislations are updated now and then.

Outsourcing payroll offers you a way out. You can leave payroll processing in the hands of professionals and invest those precious hours into increasing your company’s revenue.

3. Get the Best of Services

When you outsource your company’s payroll processing activities, you’re entrusting your payroll into the hands of professionals who were made for the task. Not only do they have the necessary experience to handle the task, but they’re also backed with the latest hardware and software.

Get the Best of Services - What To Consider When Outsourcing Payroll

Your company doesn’t have to spend money buying up-to-date filing and storage systems. Some payroll processing service providers even offer extra services that will further streamline your business’s operations.

A good example is an online time tracking system that allows your employees to log in and add their working hours on the timesheet. As the administrator, you only have to check and approve of their working hours.

Things to Consider when Outsourcing Payroll

Below are some of the things to have in mind if you want to outsource payroll for your business. Hopefully, by the end of it, you’ll have an idea of how you can get started and choose the best payroll service for your business.

1. The payroll services you need

We’d advise you to come up with a list of the payroll services you expect to receive from the service provider.

The Payroll services you need - What To Consider When Outsourcing Payroll
  • Is it paycheck processing?
  • Do you want somebody to help with the calculation of employee hours, payroll taxes, and deductions?
  • Do you want the full payroll processing package, or would like to keep some of it in-house?

In case you didn’t know, you can outsource payroll for specific activities and calculations that are a bit complex.

Partial payroll outsourcing is another great idea if you want to save more money.

Did you know that the majority of businesses out there opt for partial payroll processing? Most businesses just need someone who is payroll tax compliant to be able to keep up with the changing tax legislation.

2. Cost of Services

You don’t want to end up paying more than you have to. Remember, the main aim of outsourcing payroll is to try as much as possible and reduce your running costs. Therefore, go for a payroll service provider who is affordable and transparent with no hidden costs.

Cost of Services - What To Consider When Outsourcing Payroll

We’d advise you to outsource payroll processors who offer their services at fixed standard rates.

3. Data Protection

There is a lot at stake here. Your employees’ personal information, addresses, and government data might cost you a lot if they end up in the wrong hands. You need to make sure that the outsourced payroll service provider has implemented strict security measures.

Data Protection - What To Consider When Outsourcing Payroll

One way you can do that is by checking their policy on software and hardware updates. They must prioritize having the latest technology, especially when it comes to data protection.

We’d also advise you to do some research and see if the payroll company has suffered from security breaches in the past or had problems with client privacy.

4. User-Friendly Interface

Does their platform have a user-friendly interface? It would be even better if they could give you a practical walk-through of their system. It needs to simple enough for your employees to use without additional training.

User-Friendly Interface - What To Consider When Outsourcing Payroll

Scalability is also another thing you should look into. Their system needs to be able to continuously accommodate you as your business grows and your employees increase in number. Switching from one provider to another can be a very tiresome process.

5. Client Support Services

Is the payroll service provider in close communication with its clients? Payroll processing is critical for every business, and errors can cause a lot of losses. Make sure their customer care service is active 24 hours a day and 7-days a week.

Client Support Services - What To Consider When Outsourcing Payroll

Also, inquire about their compensation policy should an error occur. This is will help avoid a lot of inconveniences in the future.


Outsourcing payroll is the new trend for startups, small businesses, and large companies alike. If done correctly, it will save you a lot of time and money that can be used to further grow your business.

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