Outsourcing Payroll: The Challenges Involved and How to Overcome Them

Many businesses prefer to keep all departments and processes under one roof. It has its benefits, of course, such as smooth interdepartmental communications among others.  

That said, outsourcing certain processes comes with its benefits, too. One such process often outsourced is payroll. Why payroll? Well, payroll is often outsourced so that businesses have one less thing to worry about while also gaining back valuable time. Cost savings are also a factor. For instance, our Payroll Proficiency Report revealed that 60% of businesses we surveyed are convinced of the positive effect outsourcing has on the total cost of payroll handling. Businesses also found that outsourcing their payroll made the administration of contracts, the on- and off-boarding of staff, the administration of presence and absence (e.g., time worked) and overall communication with third parties easier. But there are surely challenges when it comes to outsourcing payroll, right? 

So, what are the challenges of payroll outsourcing and how do you go about overcoming them? Here, we look at five of the most common challenges and provide solutions, too. 

 

Here are five challenges and solutions regarding payroll outsourcing: 

 

1. Communication  

Challenge: Communication may be the cornerstone of any successful working relationship. While leeway should be given to a certain degree, it’s important that both parties are always honest, respectful, and professional. All details exchanged should be accurate, too, as any information withheld or misconstrued can cause issues down the line.   

Solution: Find a payroll provider that is honest, transparent, and reliable. Discuss communication guidelines with them beforehand and get the clarification you need. Then, on your side, maintain a line of communication with them to develop the relationship further. 

 

2. Data security

Challenge: It’s not an understatement to say that data security is of paramount importance to all businesses. Customer and employee information is extremely valuable and must be carefully guarded. If your payroll provider falls victim to a hack or GDPR breach, it’s your business that may well end up in the spotlight.

Solution: The quickest solution here is to verify the data precautions your payroll provider undertakes. Check their encryption and security monitoring methods and what policies they have in place. Lastly, ensure your contract includes this information.

 

3. Compliance with tax obligations

Challenge: Compliance with relevant payroll rules and regulations is essential to staying on the right side of the law. And while you might remain up to date with tax changes, your payroll provider might not…

Solution: Ask your shortlisted outsourced payroll providers how they keep up with tax obligations. The provider you choose must be able to provide current information about all tax regulations and rules. One sure-fire way to ensure compliance is to choose a trusted payroll provider.

 

4. Real-time reporting

Challenge: Something comes up and you need a payroll report ASAP. But you’ve outsourced your payroll and your provider isn’t responding to your urgent request. And then, once you’ve finally reached them, they can’t generate the report as soon as you would like. This is not an ideal situation…

Solution: Luckily, payroll software has developed in such a way that it can take over various payroll processes, such as generating and creating real-time reports. So, when choosing a trusted payroll provider, assess the software on offer, check their delivery standards, and try a demo if you can. Doing so will help you gauge what’s on offer and put any worries you have to rest. 

 

5. Hidden costs

Challenge: One of the main reasons businesses outsource payroll is to save money. In fact, half of the businesses we surveyed for our Payroll Proficiency Report said that outsourcing to an external provider had a positive impact on the total cost of payroll handling. And yet, if you have the misfortune of choosing the wrong payroll provider, you may end up paying hidden costs. These costs could cover software upgrades or redeployments, for example.

Solution: Make sure your contract is watertight and that your provider stipulates all costs. To avoid these situations and other inconveniences, choosing your payroll provider carefully is crucial.

 

If you’re looking to outsource your payroll and want to avoid challenges, SD Worx, formerly Intelligo, has the solution for you.   

MegaPay Outsourced is our flexible payroll service, delivered and managed by an experienced team of payroll professionals. Our outsourced payroll solution gives you one less thing to worry about, meaning you can focus on running your business.   

Book a demo of MegaPay Outsourced today.