8 Reasons to Outsource your Payroll

Operating a modern-day business is becoming more and more complicated. The tax-man wants more visibility on who, what, where and when your business pays your employees and contractors, resulting in a myriad of complications in relation to your payroll process. However, by considering payroll outsourcing, businesses can focus on their core competencies and let the experts handle these new complexities and compliance issues.

Let's first understand the following...

What is Payroll Outsourcing?

Payroll outsourcing uses third-party payroll services provider to handle all administrative and compliance functions involving payroll for employees. Outsourcing payroll can help businesses to save time and money, reduce the need for internally trained payroll staff, alleviate the need to purchase suitable software packages, and stay compliant with updated government legislation. 

What Payroll Functions Can Be Outsourced?

Outsourcing payroll services allow businesses to tailor the payroll functions based on their administrative and compliance needs. The common payroll functions that include in outsourcing payroll services are:

  • Managing payrolls and tax calculations
  • Processing payrolls or depositing funds directly in an employee's bank account
  • Calculating state and federal payroll taxes
  • Automate tax withholding and reporting
  • Filing ATO reports (STP reporting)
  • Performing compliance checks

When Should You Outsource Payroll?

  • The decision of outsourcing your payroll widely depends on a several factors - from understanding the number of employees, the award or EBA that you're operating under, and your reporting requirements. Payroll outsourcing services are generally used by small to medium businesses in Australia to streamline their attendance, payroll and STP and is favoured in-lieu of employing someone in-house to perform this function. It's also becoming a more popular approach than small businesses paying their accountants to look after their payroll affairs.
  • However, large organisations can also benefit from outsourcing payroll services. The main benefit to larger organisations is the labour savings from reducing internal resourced required to manage the function. For example, a business of around 50 employees can sometimes employ 2-3 staff to manage the HR/Payroll function. With an average salary in the range of $60,000 per year, these 2-3 staff members can cost the business $120,000 to $180,000 per year. The alternative, outsourcing the payroll, would cost the business as little as $400 per month. 

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What Are The Benefits of Outsourcing Payroll?

  1. Cost-Efficiency
  • Sometimes large organisations can afford to maintain sizable payroll departments. However, the case is not the same with small businesses. For small businesses, having an in-house payroll person is an expense that can be avoided. Small businesses or start-ups usually try to run on a lean budget and spending on payroll activities can absorb a large part of that budget - from calculating the actual hours your employees spend on payroll-related activities, training costs, printers, printing and distributing payslips, to fulfilling your ATO reporting requirements.
  • Considering a payroll outsourcing service can clearly help you cut major costs for payroll-related activities and allow you to focus on other internal functions of your business.
  1. Systematic Resource Handling
  • Having a comprehensive and systematic approach to handle the resources can help businesses to save thousands. Sometimes, payroll functions can consume a large proportion of your staff resources. The complications may even grow further if you have untrained staff to oversee payroll functions or do not consider payroll functions as an integral part of their roles and responsibilities.
  • Outsourcing payroll can free up such complications allowing your employees to work productively and concentrate more on other crucial tasks. With outsource payroll, you may even reduce your staff's size and expand the business with scalable services.
  1. For Training Your Staff
  • Employing staff who are fully trained in operating a payroll system can be quite expensive for businesses. For smaller businesses, employing someone specifically for handling payroll functions can quickly drain their savings, meaning they might have to train their current staff in payroll as an additional responsibility to their core role. Outsourcing payroll services work hand-in-hand with your team throughout the process - from understanding the basics of a payroll system to being up to date with the latest tax procedures and legislation.
  1. Experienced Approach
  • Sometimes, payroll functions involve a variety of different complexities that can affect its structure. Having an inexperienced in-house payroll department will add to such complications. Outsourcing payroll service providers have years of experience under their belt dealing with every payroll function and complex scenario. An experienced outsourced payroll service provider is well versed with the tax laws and latest ATO legislation related to payroll.
  1. Accuracy
  • Payroll mistakes can often result in stressful and complicated times. Therefore maintaining the correct accuracy becomes a must in payroll functions. An experienced outsource payroll service provider is far less likely to make any error than your in-house staff. Their expertise, knowledge, and detailed checking procedures will ensure you receive error-free payroll information and reports.
  • Having years of experience, payroll service providers are specialists who handle and manage the entire payroll function single-handedly. Regardless of the complexities, they can process any payrolls at a great speed, offering you a quick turnaround time on your payroll.
  1. Reliability
  • Having an in-house payroll team often means you have to compromise on output, speed and quality following holidays and sickness. Besides, there is always a risk of losing one of the key members of staff dealing with your payroll and finding a quick replacement. Such scenarios can affect your employee's payday and payroll functions. With outsourced payroll services, on the other hand, none of the situations above will affect your payroll function and still manage to offer you comprehensive reporting. You also won’t have to spend time training your new staff or helping them to understand your payroll system.
  1. Flexiblity
  • Several outsourcing payroll services can offer small and medium-sized businesses complete payroll packages in which all your business's payroll requirements can be met. These payroll packages are often flexible to meet your specific business model, so you don’t have to pay for something unnecessary.
  1. Payroll Security
  • Supervising your business’s payroll from time to time can be a daunting task. Most outsourced payroll services have reliable software and experienced staff that can detect and alert businesses in case of payroll fraud or any other legal breaches.

Ready To Outsource Your Payroll?

Our Outsourced Payroll team have decades of experience across many industries. They will go above and beyond to ensure your payroll is processed accurately and in accordance with Australian tax and superannuation legislation. Get in touch with us to discuss your payroll needs.

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