Payroll Outsourcing- The Advantages and Disadvantages  


When your sole intention for your business is to see it succeeded and grow beyond expectation you will take care of your human resource department. Payroll Outsourcing services are among the major factors of concern to your business. Payroll services sum up the salaries of the company including the compensations, deductions and benefits of each individual in the company. Smart companies use the same fixed formula of calculating the employee salaries, companies that don’t employ a fixed system often fall victims of business losses.  

In addition, there are some payroll taxes that take effect at the end of every financial year which makes it important to maintain a constant payroll system. In the recent years with the advancement in technology, there is so much information where both small and large businesses can make use of payroll outsourcing service. This can be best understood as the hiring of a third party to handle the finance and payroll services of a particular company.  

Advantages of payroll outsourcing  

  • Saves time 

When you as a company want to handle the payroll services/processing by hand you must consider the time input you will have to allow. Payroll outsourcing can be advantageous to your company since your staffs are allowed to handle other important and value-adding tasks.  

  • Saves on unnecessary costs  

If you have a big business, the cost incurred in having your own in-house payroll services is relevant but with a small business, the cost of having an in-house payroll service may be higher than hiring the services of payroll outsourcing company.  

  • It’s good for you to avoid the IRS penalties  

According to statistics, most small business are faced with penalties resulting from lack of proper employee payroll calculation majorly because the calculations involved are generally complicated with federal and state taxes involved. If you hire the payroll service companies you are sure to receive accurate calculations because they are well equipped with the necessary information.  

Disadvantages of payroll outsourcing  

  • Control is lost  

Hiring the payroll service companies means you lose control over your financial data because the information is stored in the payroll service company’s server. If a hired firm can’t safeguard this information your company will be vulnerable to theft.  

  • The company’s security threat  

Any business information is what keeps it running. Therefore, when you hand-over this information to payroll outsourcing company your confidentiality may be compromised. Therefore, you need to evaluate the firm if to make sure your data is protected.  

The cost incurred in this service is unnecessary  

Most payroll outsourcing companies use the tactic of enticing businesses to pay for an all-inclusive package which increases the outsourcing costs yet some of the extra services they have to offer may not benefit your company. To be safe outline clearly the kind of services you are seeking before hiring the company.  

  • Quality of work inconsistent  

There are times when the outsourcing company may not indicate the correct salaries or fail to deduct the correct taxes which may consequently lead to the company being penalized greatly. It’s advisable to conduct a research on the best company before you seek the services of a payroll outsourcing.  

In conclusion, whether you need to outsource the payroll services or not is a decision that should be made after considering the benefits it will bring to your company as well as the impact of payroll outsourcing.