5 Mins
Running a business can be challenging, and one of the most important tasks is ensuring that your employees are paid on time and accurately, as well as ensuring all payroll-related risk areas are well managed. When it comes to Payroll, business owners will consider all the facts and make the decision – do we handle payroll in-house or should we outsource it to a professional payroll team?
In this article, not only we will explore the pros and cons of both in-house payroll vs outsourced payroll, but we will also look at a creative way to have the best of both worlds.
Pros of in-house payroll
Control
When you handle payroll in-house, you have complete control over the process. You can ensure that everything is done to your exact specifications.
Flexibility
With in-house payroll, you can make changes to your payroll process as needed, and you are not tied to the strict timeframes agreed with your payroll bureau, you may find it easier to work in the evening, and last-minute changes are easier.
Cost-Effective
In-house payroll can be more cost-effective as there are no fees to pay for the processing work.
Data Privacy
With in-house payroll, you have direct control over sensitive employee data, and as its not being sent outside of the organisation, there is less risk of a breach of data privacy and security.
Immediate Access
You have real-time access to payroll information and can quickly address any payroll-related issues or inquiries that employees may have.
Cons of in-house payroll
Time-consuming
Handling payroll in-house can be time-consuming, especially if you have a lot of employees. Processing payroll takes you away from other higher-value tasks, your time is often better spent elsewhere in the organisation.
Risk of Errors
Payroll has become a highly technical, specialised area in recent years. If your payroll experience is limited, there is a risk of making pay errors and breaching legislative requirements. This can lead to disgruntled employees, penalties, and fines, as well as reputational damage.
Lack of Expertise
Legislation changes rapidly in payroll, keeping up with the changes is vital.
Continuity Risk
How many people in your organisation know how to run payroll? If it’s just one or two, what happens if they go off sick or leave? Are all of your procedures documented? If there is no back up plan, there is a great risk of employees not being paid and breaches of the legislation occurring.
False Economy
You may be saving money by not incurring payroll fees, but how much is this costing in terms of time spent? Could you use that time to do what you are good at to grow your business?
Data security considerations
With GDPR in mind and considering the high level of personal data involved in payroll, it’s a must to have good protocols surrounding secure remote backups, limited access to payroll data and a system that can withstand a cyber-attack.
Technology Costs
Running an in-house payroll system may require investing in payroll software, hardware, and IT infrastructure, which could be an initial expense.
Training Needs
You need to ensure that your staff members handling payroll are adequately trained and stay updated with the latest regulations, which can be time-consuming.
Pros of outsourced payroll
Expertise
When you outsource payroll to a professional team, you can be sure that your payroll is being handled by experts with up-to-the-minute technical knowledge and a wealth of experience. This means everything is done correctly and in accordance with the latest laws and regulations.
Time-saving
Outsourcing payroll can save you a lot of time, as the team will handle the whole process so there is no need to invest time in technical training. This means you can focus on other important tasks related to your business.
Reduced Error Risk
With outsourced payroll, the risk of errors and penalties is vastly reduced, as the payroll team has the technical knowledge, experience and systems in place to process everything accurately and compliantly.
Continuity is a given
There is an entire team available to work for you, so no need to be concerned about service interruption if your staff handling payroll are off sick or leave your employment.
Data Security
Payroll bureaus have a heightened awareness of the risks associated with payroll data security, so their systems and procedures are designed to provide a secure, GDPR compliant environment.
Privacy
Payroll data is sensitive and keeping this information out with the organisation will reduce the risk of sensitive information being leaked.
Scalability
Outsourced payroll services can easily accommodate the growth of your business without the need for significant adjustments or training
Cons of outsourced payroll
Cost
Outsourcing payroll can sometime be more expensive than handling it in-house, especially if you have a lot of employees.
Lack of Control
When you outsource payroll, you will have less control over the process. This means you may not be able to make changes as quickly or easily as you would if you were handling payroll in-house.
Dependence
Outsourcing payroll means that you are dependent on the payroll team to handle everything correctly and provide payroll information to you.
Introducing a third option: payroll consultant services
In addition to the traditional choices of in-house payroll vs outsourced payroll, there is a third option that businesses often overlook. This option involves hiring a payroll consultant to provide guidance, support, and expertise while maintaining control over the payroll process internally. It’s effectively a ‘hand-holding’ service for you and your payroll team. Let’s explore this hybrid approach further.