5 Signs You Need to Outsource Your Payroll

DEC 15, 2020

Payroll management is something we often tend to take for granted. It’s the sort of thing we simply assume companies are getting right, unless a specific problem comes to light. The reality though is that a lot of businesses (and particularly smaller ones) often struggle with efficient and accurate payroll management. This can be due to anything from poor organization, to inadequate software, to unclear policies regarding things like paid leave or overtime. Whatever the specifics may be though, these issues are more common than you might expect.

This is unfortunate, but it’s also a very important thing for business leaders to recognize, so that they can make the necessary improvements — and often, outsource the work altogether. This is typically the best solution, as it essentially means entrusting payroll management to dedicated and experienced professionals who will focus solely on getting this one task right.

To help business leaders recognize the need to take this step, here are five signs that it might be time to outsource payroll.


1. Your Administrative Staff Are Overworked

An overworked staff can seem more like a problem than a sign of one. But the truth is this isn’t a particularly difficult thing to spot. Among common signs that employees are overworked is a simple decrease in quality (or increase in mistakes). And decreasing quality in payroll management is going to surface sooner or later. One or two odd mistakes here or there are probably just that — odd mistakes. But if you start to see errors regularly, it’s an indication that the staff that are handling payroll internally may be overworked. By extension, it may be time to outsource the handling of payroll, and let said staff focus more on tasks that need to be done in house.

2. It’s Taking Too Much Time

This relates to the idea of the staff being overworked. But keep in mind that you may also inadvertently be asking an HR department or payroll-dedicated staff to do too much in handling payroll — particularly if the business is growing. This can result in long hours spent getting things just right, such that you may not actually see errors. However, if time dedicated to getting payroll right is detracting from other work that the staff needs to be focused on, you may have a problem. At this point, the job needs to be outsourced, again so that your own staff can focus on more essential in-house work.

3. Employees Are Raising Questions

This is an issue that can be a result of the previous two. But even if you haven’t noticed an overworked staff or too many hours being devoted to payroll, it’s possible that you may begin to receive an unusual number of questions or concerns from employees about their pay. Perhaps one employee isn’t properly compensated for overtime work in a given month. Perhaps another doesn’t have a raise processed at the proper time. Maybe another employee still simply misses a paycheck altogether one day. These are all issues that come up, and if you begin to notice them with any sort of frequency, it’s a clear sign that it’s time to outsource payroll and get professional help getting it right.

4. Retirement Plans Are Sources of Confusion

A piece on the similar subject of outsourcing HR in its entirety pointed out that external companies can be useful in managing insurance and retirement plans for employees. And given that this is in many cases an issue attached to payroll, it’s appropriate to mention here as well. The problem a lot of businesses deal with is that this is simply too complex a subject to handle in any kind of detail for each individual employee (which usually leads to vague, unhelpful forms explaining options). Among the different types of retirement plans employees can opt for today, there are numerous employee-sponsored options — such as 401(k) plans, 403(b) plans, and 457(b) plans. These operate in slightly different ways with regard to contributions and withdrawal rules, and the subtleties can be somewhat confusing. By outsourcing the handling of retirement plans as part of payroll though, a business can put this matter in the hands of professionals who will have more time to sift through details and present clear, helpful information.

5. You’re Having Software Issues

While some companies certainly still try to manage payroll in part on pen and paper, there’s really no denying the benefits of payroll software today. Programs that fit this description can manage employee calendars, create payslips, help with tax management, and ultimately save a lot of time at relatively low cost. However, there are also issues that come up with this software. Sometimes one program will handle most of what you need, but you’ll need another for a few tasks; sometimes the software isn’t quite as intuitive to use as you’d hope; and sometimes there are simply errors or glitches that come into play. If you’re managing payroll in house, it’s more or less essential to use some modern software. But if you’re having any of these issues, it’s another sign that it may be time to outsource.

Trusting external payroll services with this kind of work is becoming a more common practice, and one that a lot of businesses are glad to have adopted once they have. Managing payroll in house is doable, but it can consume a lot of time and resources, and it can easily be done imperfectly, leading to employee questions, concerns, and confusion. Outsourcing the work can ensure that it will be done properly, and allows your business to focus its efforts where they’re more urgently needed.



Specially written for PayrollVault.com


By: Romaine Jannie