Accurate and compliant payroll is crucial for any business. Whilst outsourcing payroll has been a popular choice, it is possible to handle payroll in-house with the right software and a dedicated team. 

However, deciding which option to choose can be challenging as there are benefits and challenges to both. It’s important to carefully consider all options to avoid hidden costs such as expensive change requests or training. 

Here, Simon Bradbury, Global Payroll Consultant and CEO at Global HRIS, guides you on choosing the right payroll solution for your business. 

Firstly, what’s the difference between in-house vs outsourced payroll?

The main difference lies in who handles your payroll. With in-house payroll, your company handles payroll calculations internally. On the other hand, outsourcing involves the use of an external provider.

Payroll procedures differ for each provider – so it’s important to check this beforehand. 

Once you register, you will be provided with instructions to initiate your new payroll process, as well as access to a support team for any payroll-related inquiries you may have. Following data input, your provider will manage your payroll.

Selecting a provider can be a challenging task if you are uncertain about your needs. Preparation is key and can often save you money in the long run. Start by reviewing your existing procedures to establish your requirements. 

The Benefits Of In-House Payroll:

  1. Control: With in-house payroll, you have complete control over the entire payroll process. You can customise the process to fit your specific needs and can make changes easily as your business evolves.
  2. Data privacy: All your payroll data is kept in-house, ensuring complete privacy and confidentiality. This is particularly important for businesses that deal with sensitive employee information.
  3. Cost savings: In-house payroll can be less expensive than outsourcing, particularly for small businesses. You can avoid outsourcing fees and instead invest in payroll software and a dedicated team.
  4. Faster response times: In-house payroll can be faster than outsourcing, as there is no need to wait for a third-party provider to process your payroll. This can be particularly beneficial for businesses that need to make payroll changes quickly.
  5. Employee satisfaction: With in-house payroll, employees can communicate directly with the payroll team, which can improve communication and lead to higher job satisfaction. 

The Challenges Of In-House Payroll:

  1. Increased workload: Running payroll in-house requires time and resources, which can take focus away from core business activities.
  2. Cost of software and updates: Payroll software can be expensive to purchase and maintain, and may require regular updates to stay compliant with regulations.
  3. Need for expertise: Managing payroll in-house requires knowledge of tax laws, regulations, and compliance issues. This can be a challenge for businesses without an experienced payroll team.
  4. Compliance risk: If mistakes are made in-house, there is a risk of non-compliance with tax laws and regulations, which can result in penalties and fines.
  5. Lack of flexibility: In-house payroll may lack the flexibility of outsourcing, making it difficult to adapt to changing business needs.
  6. Security risks: In-house payroll systems may be at risk of cyberattacks, which can compromise sensitive employee and financial data.
  7. Staff turnover: In-house payroll staff may leave the company, leaving the business with knowledge gaps and potentially having to train new staff.

Outsourcing your payroll: what are the benefits?

Outsourcing your payroll can offer several benefits for businesses. Firstly, it allows you to focus on your core business activities, as you won’t have to spend time and resources managing payroll internally. 

Additionally, outsourcing can provide access to expert knowledge and technology that may not be available in-house. It can also help reduce errors and improve compliance, as payroll providers stay up-to-date with constantly changing regulations. 

Lastly, outsourcing can often be more cost-effective than hiring and training an in-house team, especially for small and medium-sized businesses.

And the challenges?

Outsourcing your payroll can come with its own set of challenges and risks, too. One of the main risks is a loss of control over the payroll process: you will be relying on an external provider to manage a critical aspect of your business.  

Another challenge is the potential for errors, which can result in financial and legal consequences. Additionally, outsourcing can lead to hidden costs, such as fees for additional services or customisations. It’s important to carefully consider the risks and challenges before outsourcing your payroll.

8 Questions To Ask Yourself About Your Payroll:

  1. How much time and resources do we currently spend on payroll processing?
  2. Do we have the necessary expertise and software to handle payroll in-house?
  3. Are we up to date on payroll regulations and compliance requirements?
  4. What is the cost of outsourcing payroll compared to keeping it in-house?
  5. What level of support and services do we require from a payroll provider?
  6. How important is data security and privacy for our payroll information?
  7. How flexible is the payroll provider in terms of meeting our specific needs and requirements?
  8. What is the provider’s reputation and track record in the industry?

Ultimately, the decision of whether to keep payroll in-house or outsource it depends on various factors, such as the size and complexity of the business, the available resources, and the level of expertise required. 

It’s important to weigh the benefits and challenges of each option carefully before making a decision. Here’s where Global HRIS comes in: we can support your decision-making process at every stage. Find out more today.

Author: by Global HRIS