6 Aspects to Consider While Outsourcing Your Payroll Management Needs

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Written By Adeyemi Adetilewa

Small businesses do not stay small forever and, when that growth becomes significant enough, company leaders must reconsider their internal management strategies for possible modifications and restructuring.

Common among those considerations are, of course, payroll management. There are several reasons as to why outsourcing would make more sense at that point, which is exactly what successful small companies do so, in general.

Now, if you go looking for small business payroll management solutions, you will find that there is no shortage in the market. There are plenty, and every payroll service provider promises to be the best in their segment.

This is why it is important to take your time, go through the applicable considerations, and make an informed decision. Next, we will go through some of those important considerations which should be significant to most small businesses.

1. How Complicated is Your Payroll System?

When a company is only starting out, payroll can be handled internally, but it begins to get more complicated with time because:

  • The number of employees will increase as the business continues to grow.
  • There are increasingly complicated variations between what is paid to each employee depending on their job profiles, experiences, seniority, positions, departments, etc.
  • If you have employees in another state, and especially in another nation, those factors mentioned above become even more complicated.
  • For companies with a multistate and multinational presence, payroll tax filings can get extremely difficult to handle without expert help.

If your own business is facing similar issues with managing the payroll, it is time to consider a reputed service that can take care of the company’s growing payroll management needs.

You may not yet need to outsource your payroll management to an external service if the current internal system in place is not having any issues at all. On the other hand, that brings us to the second consideration.

2. Is Your Current Payroll Management System Cost-Effective?

Payroll Management Outsourcing: 6 Big Aspects to ConsiderBig businesses may have several in-house teams to manage all of the company’s needs in regard to payroll and HR management. They can afford to do so not just because of their size, but also because it is cost-effective for them to have in-house teams for handling the financials.

At the same time, several MNCs do outsource parts of their payroll process to external partners, especially for handling their foreign payroll and HR needs. They too find outsourcing certain aspects of the processes to be more cost-effective at times, which is always the central concept for making most business decisions in general.

As you can guess, the idea is that irrespective of a company’s size, they need to figure out whether outsourcing the payroll management duties is a productive and cost-effective decision for them. This is not any different when it comes to small business payroll either.

The only difference is of scale because the choice between having an in-house team and hiring an external payroll management partner is still made based on which would be the most cost-effective and productive choice.

A large multinational corporation might be able to keep several departments and outsource a few others, depending on the company’s needs. However, a smaller company will find that, as their business continues to grow, their present HR and accounting force is insufficient to keep up with the increasing duties, unless the company decides to give them a bigger budget for hiring additional help.

Since online payroll management and HR solutions generally offer a much cheaper alternative, outsourcing finally becomes a productive and cost-effective option for small businesses.

3. What are You Getting for Your Money?

This is a key consideration to make after you have already decided that outsourcing is the better option for your company right now.

As previously mentioned, there are several online service providers out there for small business payroll management, and choosing the right one is also just as important as the decision to partner up with an external service.

While shortlisting the best-suited solutions, qualities such as good reputation, experience, included features, reliable capacity, scalable plans, and competitive pricing should all be taken into factor. For example, G&A partners have remained a trusted small business payroll and HR solutions provider for over two decades now, providing their new clients with a reason to trust them.

4. Is There Room for Improvement?

Is there room for improvement in the way that the company’s payroll is being handled currently? Understand that this is not just a question of whether the in-house workforce is sufficient/capable enough.

The same question should also be asked while going through the hired payroll management service provider’s performance. Just because you have outsourced it, there is no guarantee that they will turn out to be as good as they promised to be in the contract.

This is especially true when you are dealing with newer accounting and HR solution providers. They may end up taking on more clients than they are equipped to handle, leading to the delivery of shoddy work.

Since errors in tax and payroll management can put a dent in even large enterprises, it can be particularly devastating for smaller organizations. Check for errors, employee experiences, productivity boosts, and security performance at the end of a financial year.

If you find them to have made errors and have overall proven themselves to be of no help in boosting much of anything, don’t be shy about seeking out alternative small business payroll and HR service providers with better work history.  In fact, it is highly advisable to work with service providers who have a trustworthy reputation for not making such grave errors.

Comparatively new businesses might feel more cost-efficient to work within the short term, but do they have the credentials and clients to back up their claims?

Before signing any contracts, be sure to check up on the payroll solutions provider by inquiring about their present and former clientele. If they are legitimately good at their job, the company should be happy to provide you with the contact details of their previous clients. Contact them formally via call or email, asking for information about the service provider’s work performance and their own experience with them.

If the service provider is not keen on sharing such details, that might be a red flag. It might indicate that they do not leave the best impressions on their clients, or that they do not have a work history to bank on.

5. Are You Ready to Make the Right Call?

Payroll Management Outsourcing: 6 Big Aspects to ConsiderWhen a small establishment grows past its initial size, it is a clear sign that the company is in good hands. However, running a business becomes more and more complicated with each expansion, and holding on to that high rate of success becomes a difficult job as a result. Even more than before, this holds true today in this highly digitized world.

If the likes of Warren Buffet are not comfortably acquainted with every piece of rapidly evolving and necessary technology being used in business, it is understandable why someone who is great at running companies may find it difficult to keep up with the changing times.

There are two primary steps that are generally implemented to counteract the problem. First, more administrative duties are delegated to other capable and specialized personnel. Second, the present leadership updates their knowledge base in the context of the problem areas.

As payroll management outsourcing is the topic here, let’s go through some of the more technical factors on which an external payroll team’s performance should be assessed.

6. The Importance of Data Security

Almost every business process is directly or indirectly dependent on digital technology today. Aside from the bare minimums, business paperwork involves very little actual paper after all. Since we cannot lock digital data into a real safe, we need to lock it in a virtual safe.

Then again, if that data is being handled by a third party, they are legally liable to provide your company data with that digital safe. To be able to do that, the service provider’s data security system and policies should be a major consideration before finalizing the contract.

No one can really guarantee against data theft with 100 percent certainty, because even the largest companies in the world get hacked frequently. However, there should be failsafe policies in place to not just minimize chances of data theft, but also to respond, inform and secure the breach as soon as possible.

There are also several other technical considerations to make here, such as:

  • The payroll management software which the external team will be using.
  • The level of enterprise-grade cybersecurity systems which they have in place.
  • Specific data security measures are taken to safeguard all common points of a breach.

If your establishment has an IT expert/department, it should be easier to delegate the duty to them.

In case your business doesn’t exactly rely on IT enough to warrant having IT experts on the permanent payroll, hire someone to help you with determining the third-party service’s data security policies and contingency plans for digital emergencies.

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