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Payroll Outsourcing Pitfalls And How To Avoid Them

By Edited Nov 13, 2013 1 1

Outsourcing the payroll duties can help a business save time and money. By having someone else do all this work, the owner can focus on more valuable areas of the business to increase profits, such as marketing and creating new products. However, there are downsides to payroll outsourcing that owners can avoid, using the following tips.

A good payroll system helps employees and Uncle Sam

The Business Potentially Loses Control

When outsourcing, it is possible for the business to lose complete control of the payroll department. While it is possible to ensure the right forms are filled out on time and the different paperwork is completed, which is a nightmare for small and large businesses, it is important to make sure this is done correctly. It still remains the company owner’s responsibility to fill out the paperwork correctly and on time.

To avoid this pitfall, it is best to have at least one member of staff qualified in payroll to check the quality of the job completed by the payroll outsourcing firm. Instead of outsourcing, the business owner could choose to use software to automate the simpler pieces and have payroll staff in-house to do the form-filling and quality checks.

It Is Harder to Correct Mistakes

Businesses often find that the payroll information is stored on a different server with no direct access. When mistakes happen, whether that is tax deductions, pension payments or even a slight problem with being paid, it takes longer for them to be corrected. This is distressing for the employees, who may be left in a harsh financial problem due to the mistake of the payroll company.

While apologizing to the employee and giving gift vouchers can help when the mistakes happen, it is important to avoid them as much as possible. The best way of doing that is to have some access to the information, such as by storing the information in-house too for quality checks before the pay is sent out. This will require some software, such as time tracking software, to help double check all information.

The Outsourcing Company Does Not Know How the Business Country Works

A lot of outsourcing is sent overseas. This causes a problem since the people overseas need to know how the law works in the country of the business. If the staff does not know which forms are needed or the deadlines for taxes, it can possibly lead legal issues for the company owner.

The best way to deal with this problem is by checking all outsourcing companies and doing some research. Find payroll companies that have built up a reliable reputation and understand the country laws. This may mean paying a little more but is worth it for the quality.

Payroll outsourcing can work out cheaper and take a lot of pressure off the business owner but there are pitfalls. By understanding the more common pitfalls, such as overseas companies and problems with correcting mistakes, business owners can learn how to avoid them. Research all companies and find the one offering the best quality or hire people in-house to keep some control over the system.

Payroll outsourcing shouldn’t give you more headaches with paperwork
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Comments

Jun 4, 2013 2:55am
moronkee
A very useful article. Is this payroll outsourcing useful for small business with only five staffs?
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