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Pros & Cons of Outsourcing Payroll

Technology has brought our society to a point where most business can be done remotely as evidenced by the scores of employees working from home. But, this is not some brand new idea. Working across distances existed long before the pandemic and has proven useful to many companies. In a lot of cases, it has made sense for a company to outsource all of its payroll logistics to an entirely separate company whose sole responsibility it is. This can take much of the weight off the shoulders of the company utilizing the service as well as provide numerous other benefits. This is summed up by radio talk show host,  Larry Elder, “Outsourcing and globalization of manufacturing allows companies to reduce costs, benefits consumers with lower-cost goods and services, causes economic expansion that reduces unemployment, and increases productivity and job creation.”

However, there are certain problems that can accompany the practice of outsourcing. In some cases, it may not be the long-term solution a company is looking for. For this reason, we connected with a few business experts to understand the pros and cons of outsourcing payroll. 

Pro: Saving time

Marcus Hutsen is the Business Development Manager of Patriot Coolers, a brand offering coolers, insulated drinkware, and more. He suggests going with an outsourced solution for payroll needs as it can free up time for a company.

“While financial software has made our lives so much easier when it comes to dealing with paying employees, it has not completely eliminated the need to dedicate time to the process itself. No matter how big or small your company is, someone will need to spend hours going over details and ensuring that every dollar is in the right place. By going the route of outsourcing, you’re saving yourself and your employees time. Not only does this reduce the mental strain associated with financial dealings, it allows effort to be focused elsewhere.”

Pro: Experts

In many cases, there is no better person to do a job than one who has done that job for a lengthy amount of time. Carvaygo is a business providing car-hauling services. Their Director of Marketing & Communications, Drew Sherman, advises taking advantage of the wisdom of those with experience. 

“If you’ve ever attempted to do payroll yourself, or even understand it, you know how overwhelming and information-filled it can be. There are numbers and terms flying in every direction at what seems like speeds too fast to be understood. This is where an outsourced expert can be a huge aid. These people know each and every detail needed to operate properly and efficiently within the payroll space. With all the niche legal regulations to be understood, having someone who has a vast knowledge of these can only benefit your company.”

Pro: Tax season

OSDB specializes in online sports databases. Their Co-Founder and CEO, Ryan Rottman, consider the impact that a payroll service provider can have during tax season to be monumental. 

“Anyone who knows anything about payroll understands there are two sides to it. There’s the regular paycheck management side and then the tax season side. While both of these are incredibly important to do well in order to avoid issues, the tax season side of these presents unique issues. When someone is exposed to payroll for a while, they become accustomed to it because of the amount of regular exposure they have to it. Seeing as tax season is arguably more intense, and is not nearly as often, it is a trying time. A payroll provider causes this potential headache to disappear as they can handle all of this with fluidity.”

Pro: Costs

Max Schwartzapfel is the CMO of Fighting for You, a brand offering personal injury law firm. He cautions others to not overlook the cost savings aspect of outsourcing payroll. 

“At this point, outsourcing payroll has been around long enough for us to see that it can save any kind of company tons of money if it is set up right. There are a couple of key aspects to focus on. First, by turning over time-off requests to another company, they can make sure that everything is operating as normal and no one is taking more days off than they’re afforded. Second, the use of e-signature software makes onboarding and many other paperwork, heavy tasks cheaper and quicker. Finally, the company handling your payroll has a deep understanding of compliance issues and can save you so much money in this regard.”

Con: Security issues

The presence of the internet has allowed companies to do things that were once impossible. However, the internet also presents problems of its own with payroll. Cottage is a business providing customized ADUs. Their Head of Architecture & Design, Anamika Goyal, proposes taking this into account. 

“For many of us, when we see the headlines related to data breaches we don’t give it much thought. Though we’re fully aware of what these breaches are and entail, they’re still a bit abstract because we haven’t experienced one ourselves. This thinking should change especially in regards to business. There are people out there who would love to get their hands on the financial data of a company. If your data is leaving your building to be processed by a third party, the odds of it falling into the wrong hands is that much higher.”

Con: Timing

Good Feels specializes in cannabis-infused seltzers and beverage enhancers. Their Founder and CEO, Jason Reposa, believes that problems with the delivery of paychecks could turn things south for a business. 

“In business finance, soft deadlines are few and far between. If information is not submitted to a payroll service in time for it to be processed then employees will be without paychecks or tax season could become a larger headache than it already is. In order to avoid either of these things, a company must be looking further forward at the deadlines than they might be otherwise. With how many other things are going on for a company at a given time, this can be somewhat of a hassle. There’s nothing worse for organizational morale than informing your employees that their money will be late.”

Con: Availability

Chris Bridges is the CEO of VITAL, a brand offering credit cards. He advises others to be wary of utilizing a payroll service because immediate access to information may not always be possible.

“As a payroll service subscriber, you’re handing over piles of both personal and professional data to a team of experts for them to handle securely and efficiently. This is a great idea until you consider one of the significant downsides: by turning over your data, you don’t have total control over it. Since it’s not being processed in-house, there will be periods where information related to accounts or paychecks is entirely unavailable. This also takes place on holidays or when the company is closed. In a pinch, this could be something that could result in harm.”

Con: Responsibility

Just because an organization is making sense of another company’s financial data, does not mean they are accountable for what happens with it. Insured Nomads is a business providing travel insurance. Their COO, Brett Estep, considers this reality important to understand. 

“In no world can you go to the IRS and say, ‘Hey, I gave my information to this company to sort my taxes and payroll. They didn’t file anything on time. That’s why I was out of compliance and it seems like I forgot to file taxes. Can you make an exception to your punishment this one time?’ You are responsible for your data and the legal ramifications that come with it so don’t let another company be your downfall.”
As shown above, there is solid reasoning for and against outsourcing payroll. Jagdish Dalal, a professional speaker and founder of JDalal Associates, LLC, spoke to the present state of outsourcing, “Companies are past the basics of talking about outsourcing and offshoring. Executives understand outsourcing now and want to know how to effectively use it in their organizations.”

Alexia Hope

Alexia is the author at Research Snipers covering all technology news including Google, Apple, Android, Xiaomi, Huawei, Samsung News, and More.

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