If you’re a business owner, you’ll already be well aware that there’s more involved to payroll than just paying your employees – the payroll function also includes tax adherence, legal compliance, and employee entitlements. In fact, payroll is one of the largest expenses for businesses, and managing it internally can often prove to be pretty challenging.
So, how can outsourcing your payroll help ease the burdens you might be feeling as a business owner? How do you know when the timing is right to explore payroll outsourcing?
What is Payroll Outsourcing?
For many businesses, completing payroll internally may appear to be a more efficient approach that allows greater control and visibility. But when you dive into the numbers it can actually be expensive, time consuming and intensive in nature. It can also be a challenge for small businesses to maintain low payroll expenses while maintaining high levels of productivity and reaching sales targets.
When payroll is completed internally, it requires businesses to employ the help of specialised payroll staff who have:
- In-depth knowledge of tax compliance
- A thorough understanding of current regulations and legislation
- Access to efficient and reliable payroll software
When businesses choose to outsource their payroll, they hand over the responsibility of managing their own payroll to companies who specialise in payroll functions and have access to professional payroll software. These companies are then responsible for:
- Paying your employees
- Maintaining legal compliance
- Calculating the correct PAYG withholding
- Maintaining up-to-date leave accruals and balances
- Lodging STP (Single Touch Payroll) data with the ATO
- Managing employee Superannuation Administration
- Salary sacrifice arrangements for laptops, novated leases etc
What are the Benefits of Outsourcing Payroll?
Outsourcing your payroll function can have the following positive impacts on your business operations:
Outsourcing Payroll Increases Accuracy and Reduces Risks
One of the best ways for a company to reduce payroll mistakes is to outsource their payroll. Outsourcing payroll provides business owners with confidence in the accuracy of their time-keeping and tracking. By crafting a payroll process that meets each individual business’s needs, outsourcing payroll decreases the prevalence of avoidable errors occurring.
When payroll functions are managed internally, it’s important to note that there are always risks of payroll fraud and theft occurring. The most common types of payroll fraud include:
- Time theft
- Leave theft
- Rate adjustment and manipulation
When you outsource payroll, your team will always remain compliant with the latest Fair Work & ATO legislation and put appropriate steps in place to ensure compliance.
Outsourcing Payroll Gives You More Time to Focus on Your Business
When issues arise within internally managed payroll, it diverts your team’s focus away from other more important tasks within the business to instead rectify the payroll-related issues that have arisen.
When payroll is outsourced, businesses will see greater efficiencies within their company, as well as an increase in productivity, time and profits, as a result of a reduction in costs for payroll software and labour. This gives business owners the opportunity to put their time and money back into their businesses.
Outsourcing Payroll Means There’s No Need to Hire or Train Specialised Payroll Staff
Recruiting, employing and retaining a team of internal payroll experts is not only time consuming and costly, but also places unnecessary stress on smaller businesses. One of the biggest advantages to outsourcing payroll is that businesses aren’t required to waste valuable resources on continued payroll training of their staff.
Outsourcing payroll frees up key staff members and capital within the business, and allows for more time, resources and money to be redirected back into the business.
How Much Does it Cost to Outsource Payroll?
While most businesses can expect to pay around $150-200 per employee each year, there are a number of factors that can impact the total cost of outsourcing your company’s payroll. The most common three approaches used to determine the cost of outsourcing payroll are:
- Per Frequency
- Fixed Pricing
- Per Employee Per Month
Per frequency is one of the most common ways that payroll companies charge businesses for their services. Depending on how often your business pays your employees (weekly, fortnightly, monthly, etc.,), outsourced payroll companies will charge a total base fee, as well as a fee for each employee on the payroll.
Often, outsourced payroll companies will charge a single fixed-rate fee per month in order to cover a set number of employees (such as $150 per month for 1-50 employees). Because the payroll company will only charge you one single fee, regardless of how frequently your employees are paid, this option is suitable for smaller businesses with a steady employee headcount.
Per Employee Per Month
As opposed to paying outsourced payroll companies fees each month, the Per Employee Per Month option enables businesses to run unlimited payrolls that allows them to pay each monthly base fee, plus a fixed rate fee based on the total number of employees that are paid each month.
This is beneficial for companies who work for commissions or bonuses and run additional payrolls as a result.
Want to Find Out More About Outsourcing Your Payroll Services?
To discuss the benefits of outsourcing payroll for your business in more detail, get in touch with our BlueRock payroll and bookkeeping experts. Our team of payroll specialists will analyse your unique situation before recommending the best option for you, your business, and your employees.