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In-House Payroll vs. Outsourcing

What is a Payroll Outsourcing Service?

 

Ensuring payroll is managed correctly and kept legally compliant can be problematic. It can require hiring expensive professionals, constant supervision, or tight restrictions to avoid fraud or the misuse of sensitive data. When you have international payroll operations to take care of, the need to keep up-to-date with changing compliance requirements can be tiresome or potentially problematic.

These reasons and others are why more and more companies are choosing to outsource their payroll needs to a third-party payroll outsourcing services provider. By doing this, companies are ensuring their employees are being paid safely, on time, and in a way that streamlines their own company structure. Many companies now offer payroll outsourcing services like INS Global, and this kind of service is essential to consider, particularly for those who may require international payroll outsourcing.

 

How Does Payroll Outsourcing Work?

 

Payroll outsourcing can take various forms, including outsourcing your payroll as part of a PEO or EOR services agreement or simply outsourcing specific services to another third-party service provider. Generally, after making an agreement with a services provider, they will collect all necessary information about your employees, such as pay rates, start dates, time card data, bonus amounts, etc. They can then perform payroll operations for those employees on your behalf. These operations can include: 

  •       Monthly Salary and Expenses Management
  •       Salary payment
  •       Compliance with local regulations
  •       Tax and insurance calculation
  •       Social security deductions
  •       Annual leave management
  •       Expenses and benefits

A professional services provider will confirm each payment and amount as often as you deem necessary. For these services, a provider will charge a monthly fee per employee.

In effect, they fulfill the role that would otherwise require the services of an entire department or team of dedicated payroll specialists within a company.

 

What are the Advantages and Disadvantages of In-House Payroll?

 

Advantage: More Control

Generally, having all the calculations and operations done in-house allows you to have a greater level of oversight into each element of the payroll process. Of course, this relies on your in-house specialists having the proper knowledge to perform these operations successfully, and it doesn’t mean that there won’t be miscalculations or misuse of the data, but you can be there to manage each step.

 

Advantage: More Flexibility

Last-minute changes or modifications will be much easier if you are involved in every part of the process. Things like bonuses payments or salary adjustments can be done with a more significant degree of flexibility, while outsourcing your payroll operations may mean needing to have everything organized at an earlier date each month.

 

Disadvantage: Employee Costs

The more you wish to do in-house, the more employees you will need to perform those operations. Of course, the more you pay those employees, the more you can trust that they have the right skills and motivations to fulfill their roles well. All of these considerations may leave you with an oversized and over-budget company structure. 

 

Disadvantage: Compliance Liability

Concentrating all of the responsibilities related to payroll management means concentrating any potential liabilities when it comes to possible mistakes or keeping up-to-date with payroll regulation changes. This is especially crucial to think about if you are looking to expand into a new market with unfamiliar payroll compliance practices or requirements.

 

What are the Advantages and Disadvantages of Outsourcing Payroll?

 

Advantage: Cost

Forming an outsourcing agreement allows you to simplify your outgoing costs and reduce overheads into one monthly payment per employee. Instead of paying a qualified professional full-time, you can pay for a team of experienced experts for their services as you need.

 

Advantage: Time

Organizing payroll in-house may keep your employees away from other key tasks. It may mean time taken up by managing or overseeing payroll operations that could better be spent elsewhere. Instead, you can have your payroll operations performed by those who know how to get it done as efficiently as possible, all while you take care of what really matters for your company’s success.

 

Advantage: Specialist Expertise

Professional outsourcing services providers use the best and latest payroll tools and techniques. They are qualified and experienced in every aspect of regulatory compliance for every market or region that you require. They’ve seen every potential problem, and they have a solution for each one.

 

Disadvantage: Security Risk

Outsourcing your payroll requirements means sending data that may be sensitive. You have to be sure that an outsourcing services provider has the right professionalism and systems in place to protect your information. When you speak to an outsourcing services provider, make sure to understand their protection systems and find out about the history of their customer satisfaction.

 

Disadvantage: The Chance of Delays

Errors in sending employee information or the need for clarification may cause delays at critical moments. Outsourcing your payroll operations requires strong upfront organization and efficient management systems. You will also have to streamline your own structures to ensure that there is no need for last-minute changes or modifications to payments.

 

How Should You Choose Between the Two?

 

Once you understand the pros and cons of in-house vs. outsourced payroll processing, it’s up to you to apply them to your company and consider which is best for the size and needs of your company. You’ll know best about the priorities for your company, whether that’s downsizing, saving on overheads, or finding someone who is going to be able to lead you through the complex regulatory structures of a new foreign market.

Depending on your situation, which of the potential options is best for your company may even be variable. However, it’s essential to think about the possibilities that exist before any potential problems arise rather than waiting to fix mistakes that have already been made.

To get another perspective on what might be best for you, contact a consultant from INS Global today to arrange a meeting. By talking to INS Global’s team of payroll experts, you can discuss your payrolling needs and learn more about how outsourcing your payroll needs can improve your operations.

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