Payroll Outsourcing Services: How and Why it Works

Payroll Outsourcing Services: How and Why it Works

Let’s suppose you’ve been managing your payroll function in-house for a couple of years. You know how intensive this function can be. You also know that it’s not exactly the main focus of your brand, and yet, it’s a function that your business can’t do without. This is a reality that most small and medium-sized organization face, and it’s also why so many of them choose to use payroll outsourcing services.

Outsourcing allows brands to free up resources, including valuable time.

But how does payroll outsourcing work, and is it a consideration you should be making?

In today’s post, the DayBPO blog takes a look at payroll outsourcing services, how they work, and how they can benefit your business.


What Exactly is Payroll Outsourcing?

As you might know, it’s a full-time job to administer the payroll. Some of the largest organizations in the world have departments filled with teams of dedicated employees, all spending their time managing the payroll. The larger the workforce, the bigger the task at hand.

While the average business owner feels like it’s an easy task to manage payroll for a handful of employees, it can still be a time-intensive function within the business. There are calculations to be done, reports to be completed, direct deposits that have to be set up, and legal compliance and tax filing that must be managed.  

Then there are some HR functions that inevitably overlap with payroll, like compliance, benefits administration, and worker’s compensation. And regardless of how large your professional plate is, that’s a lot to handle on your own.

This is exactly where 3rd party service providers (business process outsourcing partners) come in. BPO providers take over these non-core functions and oversee them while you and your teams attend to more mission-critical tasks on the organizational to-do list.


Payroll BPO Services in Action

If you want to outsource your payroll function, the first step to getting started is finding a BPO partner. This requires some careful research, as you’ll need to find a payroll specialist that understands your business niche.

After you find a partner, you’ll set up an account with them and share a payroll report, which will give them access to your payroll information. They’ll have access to your employee data, vacation policies, sick days, and benefits, to name but just a few, as all of this has an impact on how payroll is calculated.

Once you provide them with all the information they need, your payroll partner can run the payroll on behalf of your company while taking care of details like compliance, payroll tax, reporting, and remittance.


Finding the Right Payroll Partner for Your Needs

Before committing to a payroll outsourcing partner, it’s important to remember that you need to do your due diligence and properly research your options. There are various BPO service providers, and no two providers offer the same benefits.

One of the best ways of ensuring your partner with the right outsourcing provider is to have a clear view of your payroll goals. Small businesses with just a handful of employees have different needs compared to large organizations with hundreds (or thousands) of employees. You also need to make sure you partner with a provider with knowledge and services on an international scale if your business operates in more than one country.


What are the Benefits of Payroll Outsourcing?

The main benefits of working with an outsourcing partner to manage your payroll function include the following:

Time and Cost Savings

We’ve already touched on just how time-consuming it can be to process the payroll yourself. It also requires a lot of attention to detail, which leaves you unable to pay close attention to other business tasks. But with a dedicated service provider handling it for you, you’ll save endless hours of valuable time.

Although you’ll pay to outsource your payroll services, your company will enjoy a cost-saving benefit because these duties won’t be done in-house. Time is money. And in line with that thought, saving time will also help you save money in the long run.

Increased Data Security

There are many risks involved with payroll, including data theft and misuse. Nonetheless, the best payroll outsourcing providers work hard to protect and store your data on cloud-based servers that are safeguarded. Because they also use electronic payment methods, it’s easy to trace errors and protect against payment losses.

Avoidance of Penalties and Mistakes

Anyone in charge of payroll needs to stay up to date with changing regulations and requirements surrounding tax, compliance, employment terms, and data privacy. Since these areas are so complex and prone to change, it can easily cause many errors if it’s not done in line with regulations. The risk of errors like these is why many business owners prefer to leave payroll to experts’ hands. Payroll experts effectively help reduce these risks.