Payroll is one of the most important functions of your HR team, as well as one of the most time-consuming. It’s not the sort of thing you can delay; at least, not if you don’t want a serious morale problem on your hands, as almost 75% of Americans would find it difficult to meet their financial obligations if their paycheck was a week late.
To lessen this HR burden, many companies are looking to outsource their payroll processes to an external provider. This is not as common as you might think; in banking, for example, it’s thought that around a third of payroll jobs are outsourced, while in insurance it’s only a quarter. However, those who trust another firm to take care of payroll often see big benefits as a result.
Choosing a provider is therefore about deciding which of these benefits is the main priority for your business. While this is often seen as a binary choice - usually between whether you want to prioritize saving time or money - there are a lot more factors you need to consider. Here are some of the questions you should be asking yourself:
What’s the right price point?
Outsourcing payroll means paying for somebody else to take care of this important business function, and you’ll want to make sure you’re getting the best value for money. Part of that means comparing multiple providers and checking what is included in their packages, but there are also cost savings inherent to outsourcing.
For example, it’s estimated that 40% of SMEs have to pay the IRS a penalty each year for incorrectly filing payroll; a mistake that costs an average of $845. Similarly, businesses are thought to be overpaying their employees by around 4%. Outsourcing can prevent these mistakes from happening, saving your business money.
Will your software integrate?
The global accounting software market is predicted to be worth $11.8 billion by 2026, showing just how much businesses rely on this useful tool. Almost two thirds of SMEs use accounting software, and even if you outsource your accountancy, your accountant is likely to use some kind of program as well.
All this means you will need to be careful to choose a payroll provider that can integrate with your existing accountancy software. The same goes for any other program you regularly use that might interact with payroll, such as employee time-tracking software. There’s no need to replace systems that work well for your company when there will be payroll providers out there capable of integrating without issue.
Is security an issue?
One benefit of outsourcing your payroll is access to better security. This is an increasingly important factor, with payroll fraud becoming a big issue that can cost your business a lot of money; the FBI reported over 1,000 payroll diversion schemes in just nine months, with an average loss of almost $8,000.
If this is something you’re concerned about, check with potential payroll providers to see what security measures they have in place, and have your own IT team look over them if possible. It’s crucial that both you and your payroll provider take this seriously, or it could be costly.
How mobile do you need to be?
The modern workforce is much more mobile than it used to be, and thanks to the growth of cloud computing, there’s no need to restrict business to the office. Many professionals would like the ability to check up on their payroll while on the train, in bed or even on the beach if they want to. Thanks to cloud computing, they can.
With 39% of companies currently using a cloud-based payroll solution - as well as 21% considering the same - you should have plenty of potential providers who can set you up with a mobile solution. If that’s important to how your business works - for example, if you have a lot of remote employees - it could be an important consideration.