More often than not, payroll is not given the due attention it demands, hampering employee experience and creating discomfort in the long run. Improper payroll management might also result in heavy compliance-associated penalties. All these challenges can be easily tackled with efficient payroll outsourcing services. However, there are numerous myths associated with payroll outsourcing services. This blog helps you bust some common myths associated with payroll outsourcing. But before we begin, let's get our basics clear on payroll outsourcing.

What is payroll? And how can businesses benefit by outsourcing their payroll function?

Payroll is the compensation that a business must pay to its employees on a specific date, for services offered by them for a certain period. Traditionally, a human resource team or the accounting department would be entrusted with these responsibilities. However, many businesses are now outsourcing their payroll functions to save time and money. Outsourcing payroll means essentially hiring an external party to manage all or selected payroll-related functions of the company.

Time spent on outsourcing is time well spent - Robert Halff 

Outsourcing payroll processes can save businesses a lot of time and effort when it comes to screening, hiring, and managing their employees. For example, hiring an outsourcing service provider means no need to worry about heavy IRS penalties. Payroll outsourcing service providers are well equipped with the latest laws and regulations, so you don't have to stress about them making wrong decisions. Additionally, outsourcing service providers store data securely, helping prevent fraud and identity theft.

Now, let's debunk some myths and misconceptions surrounding payroll outsourcing:

Misconception 1: Risks from Exposure to Sensitive Company Information

Data protection is a significant concern in today's world. Losing personal employee information can cause substantial harm to any company. Unfortunately, most companies are worried they may be putting crucial company information at stake by hiring a payroll process outsourcing service. This is one of the biggest myths. Generally, payroll outsourcing providers sign a data security agreement with the company to reassure them of their safety and strong privacy guidelines to protect their clients.

Violating this agreement can incur heavy losses for the payroll company, putting their reputation at stake and the company at risk of losing sensitive information of their employees. In addition, data security measures, multiple server locations, and backup facilities offer added protection against any potential payroll fraud.

Misconception 2: The Employer Loses Control over Payroll Management

Another common misconception is that by outsourcing payroll solutions, companies will lose administrative control over their payroll processes. On the contrary, a payroll outsourcing firm delivers customized and tailor-made solutions to its client’s distinct business requirements. So, if you still want to correspond the cheques yourself, you can.

Furthermore, payroll service providers assign a reliable business manager to your account who delivers every segment information segment you need, just like your in-house payroll manager. As a result, the payroll processing and outsourcing procedure are entirely transparent, and you stay in complete control of the payroll processes that count most to you.

Misconception 3: Transitioning to Payroll Processing and Outsourcing is a Nightmare

Businesses are worried that payroll processing and outsourcing will pose challenges and disturbances to their existing processes. Nevertheless, this is an absolute myth. A third-party payroll service provider guarantees that transitioning to payroll process outsourcing is smooth and hassle-free. In addition, they have an experienced payroll administrator allocated for each client to ensure the process is effortless. Moving payroll to a third party may seem daunting, but it is not! Moreover, outsourcing the payroll function offers long-term advantages such as streamlined functionality with cloud computing, additional time to focus on core business actions, improved compliance, cost-effectiveness, etc.

Payroll is not what we do. It is the thing that drives our business. - Steve Wynn 

Misconception 4: Payroll Outsourcing is Not for Small Businesses

This has to be a myth because small businesses benefit the most from payroll outsourcing. Small companies have limited time, money, and resources to invest in payroll processing and related tasks. Hiring an outsourcing company or firm to provide these services can help small businesses save money and time that they can devote to developing their business. In addition, payroll outsourcing is a guaranteed solution for small and medium enterprises to avoid IRS penalties and ensure employee data security and compliance.

Misconception 5: Payroll Outsourcing Costs More than In-House Payroll Management

This is not true. A business enterprise can save a lot of money by outsourcing its payroll tasks to an outsourcing firm. Businesses do not realize that the actual expenditure of processing payroll in-house is not restricted to the salaries of in-house payroll processing staff but also involves a host of ancillary costs. The costs implicated in managing payroll in-house apply to:

  • Employees and all associated expenses, including recruitment, hiring, training, etc.
  • IT support
  • Payroll software
  • Security

A payroll outsourcing provider can help you save payroll-affiliated staff costs, time and money spent on keeping pace with rapidly-changing legislation, costs of running and holding a payroll software system, and expenses incurred on IT support.

Furthermore, payroll outsourcing solutions allow you to concentrate your energy and resources on core business activities, offering value and cost savings while assuring compliance.

Also Read: Payroll Trends to Keep You Ahead of the Curve in 2022

Misconception 6: Outsourcing Payroll Has a Negative Impact on Employee Experience

Companies believe outsourcing payroll solutions will build barriers between themselves and their staff and will have a negative impact on employees. The reality is the opposite of this!

Third-party payroll service providers deliver a personalized experience to employees by providing them access to employee self-service (ESS) software to access their payroll data. This software allows employees to have secure access to their payroll data, correct investment declarations, apply for leaves, download pay slips, and more.

Besides the above-mentioned advantages, employees can rest assured that they will receive their payroll accurately and on time, increasing their morale and productivity.

We rise by lifting others - Ralph Ingersoll

Finally, not every company may need payroll outsourcing services – for example, businesses satisfied with in-house payroll professionals who get the job done year after year. On the other hand, small businesses and start-ups should intensely explore outsourcing as a great approach to drive their workforce toward attaining greater objectives quickly and efficiently.

Dreams don't work unless you do

Smaller businesses can be satisfied immensely by 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 of a small business considering outsourcing payroll, you do not have to take a substantial chance all at once. Instead, you may gradually test whether it is suitable for you or not. Begin with simple "compliance" outsourcing. Then, if you like the service, you may outsource "tax services." This way, you can determine whether or not the collaboration works. Once you've gained confidence, you'll be able to outsource the complete payroll function.

It's all about... Having the right payroll outsourcing, with the right abilities, in the right place, at the right time.

Exela HR Solutions is a global pioneer in providing end-to-end human resource outsourcing services, including recruiting process outsourcing and global payroll processing. Exela’s skilled experts offer instant access to all the solutions you require for your business at a fraction of the cost. Contact us today to learn more about our services.

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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