Payroll is a necessary part of any small business with employees. However, it can be stressful and time consuming – especially given your staff will be understandably sensitive to any mistakes that are made.
That’s why outsourcing to a payroll provider has become an increasingly popular choice for many Australian small business owners. But is it the right choice for you?
Here are some of the pros and cons to consider when deciding if your business should outsource its payroll.
Outsourcing payroll: The pros
Freeing up time
As a small business owner, you know there’s never enough time in the day – and processing payroll, while necessary, can chew up hours you can’t afford to lose.
From processing time slips, to calculating tax brackets and leave payments, payroll can be overwhelming. Think about how much time you spend running your small business payroll – and what you could do for your business if you had that time back.
Leaving tasks in the hands of experts
Running a payroll can be tricky, especially if accountancy or maths aren’t your strongest suits. Making sure you comply with all the latest legislative and taxation requirements can also be a headache.
Using an external payroll vendor or cloud-based payroll service means your payroll is in the hands of experts – and you don’t have to have all the answers.
Outsourcing payroll: The cons
Many online payroll services outsource overseas, and their calculations and procedures may not meet Australian standards. If your payroll provider doesn’t comply with Australian regulations, you’ll be held liable, putting you and your business at risk.
Major payroll provider Plutus recently made headlines after being accused of ATO fraud totalling $165 million using their clients’ funds. What would you do if that was your business’ money?
As a small business owner, you have a responsibility to protect the privacy of your employees. But when you outsource to a payroll vendor, you’ll need to send them sensitive information about your business, yourself and your employees – including names, dates of birth, tax file numbers and banking details.
In an age in which cyber-attacks are increasingly common, this can open your business up to issues like fraud and identity theft, which have real-life consequences – not only for your employees, but also for you and your business, which can be held liable for any breaches.
For information on cyber-attacks and how to prevent them, see our article on protecting your business against ransomware.
What should you do?
Like any business decision, the only way to decide whether you should manage your payroll in house or externally is to assess your specific needs.
Key things to consider include:
- Number of employees. The more you have, the more time and money you could save by outsourcing payroll.
- The cost of running your payroll in house compared to using an external provider. Make sure you include both financial and opportunity costs involved when you assess this.
Different payroll providers offer different services, and the costs will depend on the size of your business and the options you choose.
For a full cost analysis, have a payroll outsourcing company assess your needs. And as always, make sure you do your research to find the best solution for your business.
Interested in outsourcing your payroll, but need the finance to invest? A Prospa Small Business Loan can help your business grow.