9 Benefits of Outsourcing Payroll in 2022

Wondering if you should hire a third-party payroll provider? There are plenty of benefits of outsourcing payroll - learn more about what they are.

Stefana Zaric
Written by Stefana Zaric
November 17, 2021
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Whether you're thinking about expanding your business or simply scaling it, payroll processing might be giving you headaches. It's complex and time-consuming, and there's no room for mistakes. Fees, taxes, and employee compensation - it's way too much for one person to handle, especially if you run a small business.

So, what could be the right solution to your troubles?

Doing payroll in-house may not be possible for small business owners because their budget is limited, and they can't hire full-time employees to take care of it. And if you're going global, opening a local entity is also out of the question since it takes too long and costs too much.

How about outsourcing payroll, then?

In this article, you'll learn why it's a great idea.

What is a payroll company?

Although some employers have an in-house payroll department and process payroll through manual bookkeeping or software, some companies prefer to outsource payroll services to a third-party company specialized in managing payroll.

Payroll companies typically use payroll software solutions to streamline and automate your payroll process and make it error-free. Their tasks include more than simply making payments to your employees.

Here's what payroll providers do:

  • Process direct deposits to your employees' accounts
  • Ensure that payroll taxes and deductions are calculated accurately in compliance with local tax regulations
  • Track employee attendance and hours spent working so they can calculate correct paychecks and wages
  • Keep records of your payroll
  • Process wage garnishments
  • Implement your employee benefit plan

Payroll service providers can take a lot off your Human Resources department's plate. But this is only one of the benefits that outsourcing payroll services can have for your business.

Here's a detailed overview of how third-party payroll management can help you thrive and optimize your internal processes.

It's cost-effective

Outsourcing payroll functions can dramatically reduce the costs of running payroll. How's so?

Here's an example. Unless you're a developer, you'd need a lot of time to learn how to build a website and maintain it, pay for hosting and other software you may need, and you may still end up with a malfunctioning website and having spent a lot of money for nothing.

The same goes for handling payroll. If you choose to do it on your own, you need to pay the person in charge, cover software licenses and renewals, and more. But if you delegate this part of your business to the right payroll provider, paying for their services can turn out to be cost-saving in reality.

It saves time

As a business owner, you need to focus on what's required to grow your business. However, payroll is not one of the core functions of your business and it's not necessary for you to spend hours and days calculating employee pay and benefits when you can easily outsource this service to professionals who can do it in less time and still bring you a good ROI.

Time savings are invaluable when you're on tight deadlines and have no substantial knowledge of processing payroll: by using an outsourced payroll provider, you'll make more time to spend doing what a CEO is supposed to do.

It gives you access to expertise

Payroll experts keep tabs on the latest trends, new software solutions, and best practices in payroll management, so you can know for sure that your payroll system is optimized at any given moment.

They can also conduct regular checks to confirm that the data is accurate and up-to-date and your documentation is compliant. That way, your company won't raise any red flags with tax authorities or call for a needless audit from them.

It helps you take care of tax filing

Taxes can be a tiresome task on your to-do list, especially if you're expanding your business and hiring from countries around the world. It would take a lot of time and effort to study all the different legislations you have to comply with regarding mandatory employee benefits for each country, tax deadlines, workers' compensation, and more.

Not to mention the fines and IRS penalties you may face if you make a payroll mistake and miscalculate the taxes. However, this is a responsibility an outsourced payroll provider can easily take over for you and make sure your global payroll is completely compliant.

It gives you peace of mind

Whether they're in charge of a start-up or a corporation, business owners inevitably have to deal with a lot of stress. You need to make dozens of critical business decisions on a daily basis, so having a reliable payroll partner can give you peace of mind, at least regarding employee salaries, taxes, compliance, and related matters. Reduced risk in this aspect of a business enables you to redirect your energy to core activities and business planning, where your role is crucial.

It improves employee experience

Payroll errors commonly occur when payroll is handled by someone who's not an expert or has too many responsibilities to approach them with the necessary diligence. These mistakes can result in inaccurate or late payments to the employees, affecting their overall employee experience in a great measure.

A good payroll provider can contribute tremendously to your employee retention strategy, even if you run huge teams where everyone has different contracts, wages, pay periods, etc. This is especially true for global companies, where managers need to work hard to retain talent: payments made timely and correctly is the least you can offer to your workforce.

It sets free your HR and finance department employees

Different businesses have different structures, but in most of them, HR or financial department workers are in charge of payroll.

However, processing payroll is a time-consuming task and may stop you from using the full potential your employees in these positions have. By outsourcing payroll services and automating most payroll-related procedures, you allow them to focus more on planning and optimizing processes and increasing productivity they have as individuals and teams. And you'll decrease the risk of losing your best employees because they feel overworked!

It eliminates unnecessary paperwork

When running payroll manually, or even if you use software solutions, you typically need to collect and keep a lot of documentation. That seems to work fine when you have a small team, but what happens when you scale your business? You're buried under a ton of paperwork, and it becomes easy to lose track of tax forms, contracts, and other vital documents.

Switching to an external payroll provider can solve this issue since they're in charge of managing your documentation and keeping your payroll records organized and accessible whenever you need it.

It provides exceptional data security

As third-party payroll providers have to handle a lot of outsourced data, they also need to ensure high security for their clients. Note that this could be one of the primary questions to ask when looking for the right payroll company - how do they keep employee information safe and prevent leakage or hackers getting into their databases?

Another point goes to outsourcing this type of service due to a reduced risk of embezzlement and identity theft. In companies with in-house payroll processing, employees in the payroll department have access to employee data on the company level, which increases the chances of someone tampering with it.

Are there any downsides to outsourcing payroll?

Despite having numerous upsides, outsourcing payroll comes with its own shortcomings. Here's a quick overview of what may represent an obstacle for you to make a final decision.

  • Initial time investment: It may take some time to educate your employees on new procedures and set them up with your new payroll provider.
  • Accountability: In case you make a mistake and choose an unreliable provider, you're still accountable for any mistakes they make.
  • Costs: The license for payroll software is typically included in service costs the provider charges, but if you opt for any additional integrations (for example, HR software), you'll have additional fees to pay.

You can effortlessly solve these potential challenges with careful planning and defining your business needs in advance. Take your time to explore the available options and compare different providers to ensure the one you choose offers all the functionalities your team needs. You can also make a list of questions you need to ask your prospective payroll company before you decide or sign a contract.

Experience the benefits with Deel

These benefits are even more noticeable when you need to hire globally and take care of contracts, employee benefits, and make international payments. But we make sure to remove this obstacle for you.

With Deel, you can fund payroll with just a click and automatically calculate taxes without lifting a finger. Our multiple currency options and various withdrawal methods make it even easier for your team to get paid on time, every time so that you can have one happy team.

Sound like something your business could use? Reach out, learn more about global payroll, and book a demo to see Deel in action.

Deel makes growing remote and international teams effortless. Ready to get started?






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