The decision whether to outsource the payroll function or keep it in house typically comes down to cost, which varies widely depending on the type, size, and growth trajectory of a business. While smaller businesses might save money on tangible costs by keeping payroll in house, factors such as multiple locations, employee benefits, employee turnover, and variable compensation (vacation pay, bonuses, etc.) can increase the operational cost of processing payroll. Advantages exist for both outsourced and in-house payroll processing.
Payroll Time Comparison
Payroll processing is staff-intensive. As your company grows and you increase the number of employees, the payroll job takes even more time. If you’re handling the payroll yourself or assigning the job to someone else without a background in payroll, the job can take even longer due to lack of experience in the role.
By outsourcing payroll, your business can allocate valuable staff time and resources to other core functions. Say you’re handling the payroll yourself. That takes your time away from marketing, product development, staff mentoring, and other activities that better align with your areas of expertise. One way to recoup this time is to use apps such as PaymentEvolution that integrate with your QuickBooks Online program. This option helps you automate part of your payroll and easily transfer payroll data into your accounting system. When you sync the payroll function with your accounting system, you can take a more accurate snapshot of your business to spot potential issues early. You also have a greater capacity to forecast growth or changes in your employee count.
Cost of Payroll
The argument against in-house payroll often centers around the costs of a dedicated staff person and the hard resources required to meet a payroll every week or two weeks. You have to pay that person a salary and benefits, which adds to your overall expenses. Eliminating the staff function for payroll in favour of outsourcing may result in savings, and it eliminates other costs associated with payroll, such as technology, materials, and fees. Even if the cost of outsourcing is equivalent to the cost of payroll processing internally, the business can realize savings through an increased level of operational efficiency.
When you handle payroll yourself, you can also save money on the process. You may have to pay for the payroll app you use, but you aren’t paying a salary for a full-time payroll staff member or paying for outsourced payroll services. But when you focus on payroll, you’re taking yourself away from potentially income-generating activities. Adding a staff member or a payroll company to your expenses may generate enough extra revenue to justify the expense when you can focus on those other activities.
Payroll Data Security
Protecting your employees’ personal information is an important consideration when handling payroll. By keeping the data in house, you can create your own security layers to protect the information while having control over its access when needed. You have complete control over the security measures you take, including encryption, firewalls, and backups in case of computer malfunctions or physical damage. You can also opt for paperless payroll to minimize the amount of physical documents containing personal identifying information.
When you outsource payroll, security is something you should investigate fully. Find out what type of safety precautions the company takes to prevent theft of personal information. Check out the security features the company uses to protect against cyber threats. This information helps you choose a reputable payroll provider with minimal risk to your employees’ personal information.
Do you feel confident in keeping up with all of the payroll regulations? Mistakes in your employees’ pay can cause frustration, and failing to meet all of the requirements and regulations can cause compliance issues that result in problems for your small business. Payroll companies keep current on those regulations to help you stay in compliance, saving you the money and time needed to deal with any issues.
Payroll processing requires specific skills and knowledge to make sure you’re in compliance and handle the payroll accurately. Third-party providers have access to the latest technology for payroll processing and payments, including direct deposit. Payroll providers are steeped in experience and expertise with federal and province requirements, so penalties and late fees don’t have to be a concern for the business.
If you want to handle your payroll yourself, use a program such as QuickBooks Online to help you through the process. Even if you’re not an expert in payroll, the system simplifies the process and helps you handle payroll accurately. Did you know you can pay employees in QuickBooks? Add Payroll today.