Sushil Ghorpade
Sushil Ghorpade

Payroll outsourcing has been around since the early 2000s and is flourishing ever since its inception. It has always worked out for the larger companies that have the financial liberty of throwing a few hundred thousand dollars here and there, trying to experiment and find newer ways of cutting overhead and increasing profitability. After finding success early on, word spread like wildfire, and today more than 30% of all businesses in the US outsource some or all of their payroll to experts like Exela HR Solutions.

Today, it seems that two big problems are plaguing the decision-makers of SMBs. The first being, the “not-for-us” problem. Many SMB owners and managers investigate payroll outsourcing on the surface and make up their minds. They conclude that it won’t be a profitable decision for their business to shift to payroll outsourcing and that it is only suitable for larger businesses with many employees across different locations. In reality, that statement carries only half the truth. While it is true that profitability increases as the size of the business increases, most managers and owners fail to recognize that the opposite is also true. The fact of the matter is, even if your business has five employees, you can still find profit in outsourcing your payroll functions.

The second problem is the “delegation” problem. This problem is more evident in newer businesses and startups. Business owners or managers who fall prey to this problem prefer having full control of the entire process, at all times. They find it difficult to delegate responsibilities to others. They might have their reasons that may be valid, but at the end of the day, this mindset acts as a hindrance in the path of growth and efficiency.

Now, let us look at some of the real benefits of payroll outsourcing for small businesses.

  • Scalability: Nobody starts a business to watch it consistently undergo losses. People start businesses to grow them as fast as they can, as much as they can. When a new business is starting up, owners might think that they don’t need payroll outsourcing as of this moment, when they have fewer employees. It simply might not make sense. This is a valid reason in the short term but not in the long term. If you have a vision for your business to stay relevant and grow for years to come, scaling up should be the core of your growth strategy. Most people think of “scaling up” as getting new customers; that’s it. However, there’s more to it. The infrastructure around the business must also scale up for the business to support an additional influx of customers. This includes payroll. As the business gets new customers, the number of employees working for the business also increases and with it the complexity of payroll. If you invest time and money today in securing a high-quality partnership with a payroll outsourcing provider like Exela HR Solutions, scalability becomes a cakewalk for your business in the long run. If, for some reason, you decide to invest after a few years, you won’t find enough time to test the partnership at that point in time. Additionally, you will be entering into an agreement at a much higher price point in the future, thanks to continuous economic inflation.
  • Compliance: Smaller, especially newer businesses, are all about saving costs. This is their primary focus, as it should be. Unfortunately, too many businesses are too careless about their initial capital and, as a result, burn through it sooner than they would’ve liked to. Sharing office space, having fewer employees, drawing a lesser salary, extending working hours, etc., are just some of the typical sacrifices made to save resources and grow a company in the initial phase of its life cycle. Of these sacrifices, one which stands out in almost every small business is having fewer employees. This translates to the fact that all employees wear multiple hats and are not limited to their domain of expertise. For instance, the web developer is also the designer, the content writer is also an SEO expert, and the HR generalist is also the payroll specialist. This multi-specialty methodology could work in areas like web development or marketing, where the margin of error is large, and mistakes can be absorbed without any real damage. However, in areas like payroll, where compliance laws are strictly enforced by local and international regulatory bodies, any mistake can result in hefty fines or even lawsuits. Moreover, laws keep changing regularly. Keeping up with all laws at all times can be exhausting and risky. Payroll outsourcing providers like Exela HR Solutions have dedicated payroll experts who help SMBs stay compliant and out of trouble. By outsourcing all compliance responsibilities, you de-risk your business substantially at a fraction of the cost. The important thing to remember here is that large companies have the capacity to pay off fines and settle lawsuits outside court simply because of their size, influence, and financial stability, while small businesses may not have such resources at their disposal and may even shut down after getting caught in such cases. Linked Blog

Also Read: 4 Things You Must Consider Before Choosing a Payroll Outsourcing Partner for Your Business

  • Opportunity Cost: Every human being, every business, will have only 24 hours every day to get the job done, and one person can do only one task at a time – this is the reality. Therefore, it is imperative to prioritize what matters the most and finish that job first. For example, if you decide “sales” to be the most essential function of your business, you must make sure sales activities are prioritized every single day. On the contrary, you must also ensure other low-priority items do not take up much of your time. HR and administration do not directly contribute to the growth of the company and must be given secondary status when compared to core activities of the business like sales, marketing, R&D, customer service, etc. Imagine your company is growing at a fast pace and you are allocating more and more resources towards payroll processing and compliance to avoid inaccuracies/fines and ensure timely payouts for your employees. You will achieve both objectives without a doubt, but at what cost? Instead, if you decide to invest in a reliable payroll outsourcing provider like Exela HR Solutions, you can scale up effortlessly using our expertise and robust technological infrastructure. All the time, money, and efforts you save by outsourcing can easily be diverted to all the core functions of your business, increasing your growth rate.

Conclusion: Smaller businesses can benefit immensely from a payroll outsourcing provider. It can help them scale, stay compliant, and save on resources that can be channeled to different core functions of the business. If you are the owner or manager of a small business thinking of outsourcing payroll, you don’t have to take a leap of faith all at once. Instead, you can dip your toes in the water to understand if it works for you. Start with outsourcing just “compliance”. Then, if you like the service, outsource “tax processing”. In this manner, you understand if the partnership works or not. Once you gain confidence, you can outsource the entire payroll function eventually.

Exela HR Solutions is a leader in global payroll processing with compliance expertise for different locations worldwide. Contact us today to learn more about our offerings.

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DISCLAIMER: The information on this site is for general information purposes only and is not intended to serve as legal advice. Laws governing the subject matter may change quickly, and Exela cannot guarantee that all the information on this site is current or correct. Should you have specific legal questions about any of the information on this site, you should consult with a licensed attorney in your area.


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