Why Payroll Is One Function You Should Outsource

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Business consultants have long advocated outsourcing non-core functions. 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 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 just to investigate and identify appropriate outsourced service providers? Then there’s the work involved to transition the function outside to the third party service. Do the benefits of outsourcing outweigh that effort?
There are indeed several long-term advantages to be gained from outsourcing payroll.

Ideally, outsourcing achieves three main goals:

  • It frees up time and resources to focus more on your core business.
  • It gives you access to more technology and expertise to perform payroll well.
  • It reduces costs and risks.

Let’s examine each of these benefits in more detail, and what they mean

Focus Better on Your Core Business
Payroll is one of those critical functions that may not directly increase sales. 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 laws when it comes to employees. It takes considerable time and attention to detail to deal with them. There are the obvious legal requirements, such as tax reporting and remittance. In some cases, there are electronic filing requirements. As an employer, you also need to understand wage and hour laws. For example, you need to know when you are required to pay overtime. You may have set aside a certain amount of time each week to run payroll. Then you get an unexpected surprise in the form of a notice from the regulatory authority. Now you have to go through your records and investigate to determine if you actually committed the infraction. All of a sudden you are involved in a dispute resolution.

Get Access to Expertise and Technology
Another reason to outsource is to get access to expertise and technology.And every year new laws and regulations are enacted. 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 online. 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. 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, he noted. Employees also are beginning to use mobile apps to check their own records. It is expected payroll mobile usage to continue to grow, because it frees up business owners and managers to leave the office.

Reduce Costs and Risks
Outsourcing payroll can also assist with cutting costs and limiting risks. On businesses are overpaying employees by about 4 percent because of differences between the employee’s time and an accurate time record. Just having a more accurate time and attendance record keeping solution can save money. Today there are outsourced solutions for businesses as small as one employee. Solutions are affordable for small businesses, depending on needs. A good payroll provider offers capabilities that go beyond what you can do on your own. If you haven’t considered an outsourced solution before, give it a due consideration. It will deliver peace of mind for you as the owner, and free up time in your company.

Source: Smallbiztrends.com