Payroll Services
Published November 03rd, 2016 by

Unraveling the 6 Common Myths About Payroll Outsourcing

Unraveling the 6 Common Myths About Payroll Outsourcing

One of the biggest questions among businesses today is whether to hire a payroll services company to take care of processing employee wages. While trusting experts seem to be the obvious solution to most business needs, companies still find themselves holding back from outsourcing this particular task. And this is mostly due to myths about entrusting a third company with payroll needs.

If you find yourself in this dilemma, then unraveling the most common misconceptions about payroll outsourcing will help you determine if this service is right for your business. After all, the only way to find gold is to dig through mounds of mud first.

Payroll Definition

To help you better understand the psychology behind these myths, you need to know what payroll is. Investopedia, an online resource for business processes, defines payroll as the payment received by employees for a set period of time. This includes all the compensations that employees are entitled to such as salary, incentives and commissions.

When handled in-house, processing the wages is handled by the accounting department. Payroll associates often benefit from time tracking tools that make the process easier. Time sheets integrated with the accounting system automatically generate the information needed to ensure that employees get compensated on the agreed payout date.

For smaller companies, it is not uncommon for business owners to take care of processing payroll. Another option for these types of businesses is to have an associate assigned to complete this task for the entire company.

Some companies choose to outsource the process to firms that specialize in handling payroll.  However, despite the benefits of having professional companies handling payroll, it is still considered as a risky move or an unnecessary cost because of the following myths.

Myth # 1 -In-House is Cheaper

When you do compare the cost of hiring a third party company versus having an internal team handling payroll for your company, the former may seem like a huge amount of money. But when you add up the costs you incur by doing it in-house, you may be in for a big surprise.

The cost of running your own payroll team is not limited to just the salary and compensation of these employees. There are other factors that you will need to consider as these incur costs. These factors include the following,

  1. Recruitment Costs – When you hire accounting associates, you spend money on the recruitment process. According to Quarsh, a recruitment process outsourcing firm based in the UK, the cost of recruitment is often underestimated by 90%. These are costs that you have to factor in when sourcing for competent applicants to process your company’s payroll.
  1. Operational Expenditure – This is the budget allotted for things that are often overlooked such as utility bills. Whether you have an entire team or just one individual taking care of payroll, there will still be a need to use equipment that will be consuming energy as well as space in your office where they can work. Utility bills and office space are costs that you shoulder with an in-house team.
  1. Employee Development Costs – Your payroll associates need to receive regular training on ever changing labor legislations to ensure that they are able to do their job efficiently. Regardless of whether training is free, you will still need to give time to complete these development programs.
  1. Capital Expenditure – Unless you intend your team to work with sheets of paper, pens and calculators, you will need to invest in and run payroll system software. You will also need to purchase or upgrade work stations for your in-house team to use.

When you take these costs into consideration, then running your own payroll team can ultimately be more expensive that hiring a top payroll services company.

Myth # 2: Payroll Services Outsourcing Are for Big Companies

Many small businesses choose not to outsource to payroll services firms mainly because they don’t see the need for it. Because of the size of their operations, business owners believe that they can handle their payroll without any trouble. They see these services as something that are only beneficial to medium and large scale businesses in terms of cost and efficiency.

But in reality, even small businesses have a lot to benefit from outsourcing. One of these benefits is that company resources can be focused on revenue generating activities rather than time consuming admin tasks. The business can allocate more budget and manpower on sales, marketing and operations.

Small businesses can rely on the expertise of professional payroll services to ensure that their employees’ wages are handled efficiently.  The service streamlines payroll processes without the need to invest in additional manpower or equipment. This enables small businesses to operate more cost efficiently.

Myth # 3: Outsourcing Is Not Safe

The last thing companies want to happen is for their payroll data to be compromised or exposed. With very sensitive information such as bank account numbers and compensation packages, it’s easy to understand why entrusting it to people outside of the company can be a tough decision.

Some business owners and managers believe that outsourcing may leave them vulnerable to security issues which can have serious repercussions. With a third party company handling confidential financial information, the possibility of a breach becomes even more alarming.

However, while entrusting data to a payroll services company for businesses means sharing sensitive details, there are various security measures put in place. Providers enter into a non disclosure agreement with the company they are doing business with. This basically means that the third party payroll service provider will be held legally liable for any breach or information leak.

Myth # 4: Outsourced Payroll Services Is Unreliable

The idea of letting another company handle payroll processes can be a frightening thought for some. Business owners doubt the reliability of this service. How can they be sure that the service provider will be able to maintain high standards and avoid any disastrous errors?

This is the reason why quite a few businesses choose to invest in costly integrated payroll systems rather than hire a professional firm to take care of their needs. These businesses feel that with the lost of full control over the process, they open themselves up to undesirable outcomes such as inaccurate and delayed wages.

While this belief may be valid for some cases, simply choosing a reputable and experienced payroll services solutions provider can help ensure that you get top notch service.  When you work with a professional company, you have the benefit of knowing that your payroll process is handled by qualified teams that are considered experts in their field.

In addition, instead of errors or mistakes in the payroll ballooning, you’ll actually experience the opposite. Since these providers are able to focus specifically on your payroll, you can rest assured that every single detail will be checked with a fine toothed comb.

Myth # 5: Taxes Should Only Be Done In-house

The only way to ensure that taxes are handled efficiently to avoid any possible penalties is by doing it internally. Other companies such as payroll solutions companies cannot be trusted with this task. You simply cannot afford to have this processed by someone else.

While this may sound like a sound reason to stay away from outsourcing, this is a myth that can actually hurt your company. Working with experts means you get to take advantage of their knowledge in taxes and other labor legislations that can prevent any legal issues.

Companies who offer payroll services to businesses are staffed with well trained and experienced teams. They can ensure that the proper taxes are applied while protecting the privacy of your company’s payroll data.

Myth # 6: Paper Timesheets are Necessary

Many companies still rely on traditional methods for time tracking processes. These methods often include utilizing paper timesheets in keeping a track of employees’ work hours. And there are businesses that believe these hard copies are still a necessity. Without manual timesheets, payroll processing will not be successful.

This belief however, cannot be further from the truth. Paper timesheets are actually not the most reliable resources for payroll processing. It can be riddled with errors and prone to getting lost or destroyed. And when this happens, it certainly throws a wrench in the works.

Changing to an automated system and working with professional firms is actually a better way of ensuring that your payroll process is more efficient. In fact, payroll service reviews available online show that most businesses that choose to outsource, experience less issues with processing employee wages.

With these myths out of the way, it’s easier to appreciate how your business can benefit from outsourcing payroll needs.

Benefits of Outsourcing Payroll Services

With these myths out of the way, it’s easier to appreciate how your business can benefit from outsourcing payroll needs. Below are just some of the reasons you should choose to work with experts.

  1. Have the peace of mind knowing that professionals are handling your payroll process.
  1. Reduce the chances of errors or mistakes in employee wages that can affect productivity and morale.
  1. Enjoy the advantage of experienced professionals ensuring that the proper taxes are filed to avoid any legal issues.
  1. Reduce the costs involved in payroll processing without compromising integrity or efficiency.
  1. Stay more in control of payroll processing with provided automated time tracking systems.

The biggest reason why companies stay away from outsourcing is actually fear. Change can be pretty frightening and without the right information, it’s easier to believe that hiring payroll services companies is an unnecessary cost.

Visit and check the list of reviews of payroll services providers so you can start exploring your outsourcing options today.

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