Which is Better, Internal Payroll or Outsourced Payroll?

No matter what business you run, how many employees you have, or what you choose, there is one thing that every business needs to consider and that is payroll. They have two choices when it comes to your payroll and they do all your payroll in-house or outsource your payroll to an outside company. This article examines which option is the most cost-effective for businesses.

The legal side

Payroll isn’t a lighthearted affair, and there are laws in place to ensure companies follow the right process. This legislation is constantly evolving and it is your responsibility as a company to keep up to date with any changes. If you want to keep your payroll in-house, you need to make sure you are aware of all the legislation and keep up with the changes. This takes time, effort and money. When you outsource your payroll, you don’t have to worry about the legislation as the company you outsource to is responsible for keeping you in line with the law.

employee costs

One of the biggest cost factors for a company that decides to use internal payroll is the personnel costs. You may be extremely knowledgeable about the payroll process, but if not, you must employ a few payroll wonders to help you out. This results in your company having to spend funds on hiring, training, salaries, vacations, pensions and other general staffing costs. Using a payroll company means you don’t have in-house staff or worry about the costs involved.

IT spend

Aside from staffing costs, IT costs can also be significant for those who choose to run payroll in-house. You must consider the cost of hardware, software, upgrades, maintenance, and other potential IT expenses such as ongoing support. If you decide to use an external company for your payroll accounting, these costs will not apply.

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Other expenses

There are a few other minor expenses related to internal payroll. Stationery alone might not cost a lot, but when you consider the need to buy items like ink cartridges, paper, pens, envelopes, and payslips, it’s easy to see where the costs start to add up. Again, outsourcing your payroll relieves you of these expenses.

In-house vs. outsourcing

Overall, outsourcing payroll can be a much more cost-effective option if you only have a handful of employees. Of course, outside companies will charge you for their payroll services, but often the fee they charge can be much cheaper than all of the costs mentioned here. SMEs will benefit most from outsourcing, while larger companies with significant staffing levels are likely to benefit from an in-house team.