There is no one-size-fits-all approach when it comes to payroll. It really depends on your unique scenario.
Technology has become a big part of the picture
Whether you use an in-house payroll system or you outsource it completely, technology is becoming ever present in the tasks that we perform every day, and payroll is no exception.
Cloud computing technologies have enabled the streamlining of core payroll administration, but even technological offerings can vary significantly when it comes to performing the same task.
That is why selection of a vendor requires a good amount of research and a deep understanding of your own business needs. I am often asked which payroll option is the best. The truth is – it depends!
One thing is for certain though. Payroll is a strategic function of the business, and there are great savings to be made based on the type of payroll processing you choose.
In-house Payroll Processing
As its name suggests, in-house payroll refers to keeping your payroll internal to your business. This includes hosting and maintaining the chosen payroll system on company servers. You are also responsible for data security and backups, as well as managing your own payroll processing.
That said, you are likely to have support from system vendors who can see you through updates though this might come at an additional fee. Often, there are set up costs and your payroll team needs to be well informed of the latest changes to awards to ensure compliant payroll processing.
While there are labour costs associated with running an in-house operation, your business has full control of the pay process.
Outsourcing your Payroll
From data security to payslip production, outsourcing companies often oversee the gamut of payroll processing.
But employers take heed: Outsourcing your payroll does not mean outsourcing your responsibilities. Often, payroll outsourcing vendors only take specific direction from you but will not make decisions on your behalf as to how employees should be paid.
Companies that choose outsourcing often cite costs savings thanks to the reduction in administrative labour but companies with over 200 employees often find it beneficial to have an internal payroll employee that can be the interface between employees and the vendor.
But first, consider
Before you make a decision to switch between approaches, really take some time to consider the functions that add value to your business.
More and more data and analytics are driving key decision making. Are there accurate reporting capabilities with your system? Are you getting timely support from your vendor? What are the actual costs?
Keep in mind that there are other middle-ground options too, such as Saas offerings and cloud payroll systems, where vendors manage platform updates and backups, but employers take responsibility for the employee database and payroll processing.
Whichever you choose, make sure that is it right for your needs. If you decide it really is time for a payroll system revamp, ensure that there is someone within your company that can manage that change.
But more importantly, ensure that your new system will be used optimally by building payroll knowledge training and process review in your implementation plan.