We are not talking about how much you are paying your employees but rather how much you are paying to do payroll from end to end. Depending on the complexity of your benefits, if your employees are all in one place or scattered across the globe, and many other factors, you may not have the skills and expertise to manage payroll cost-efficiently. To decide whether to do payroll in-house or outsource it, you need to get a handle on your hidden costs.
We are not talking about how much you are paying your employees but rather how much you are paying to do payroll from end to end. Depending on the complexity of your benefits, if your employees are all in one place or scattered across the globe, and many other factors, you may not have the skills and expertise to manage payroll cost-efficiently. To decide whether to do payroll in-house or outsource it, you need to get a handle on your hidden costs.
If your company has a very stable workforce, no part time or contract workers, and simple benefits, your payroll costs are mostly fixed. If you are expanding rapidly, adding more workers, and using a variety of pay cycles it becomes more complex. If you do not have the expertise to manage this sort of situation and are always playing catch-up, it can be expensive and you may not even realize it. The more staff turnover that you have, the more locations from which you work, and the more remote workers that you have, the more you need a level of expertise that you probably do not have in your payroll department or in your payroll software. If your workload peaks, falls off, and peaks again, you may be understaffed at times and overstaffed at others. Either you are paying overtime to get payroll done or you are paying staff that is sitting around waiting for the next spike in activity. Either way the hidden costs will hurt you. If you outsource your payroll to a trusted company, you have someone who can absorb the peak work and you will not be saddled with hidden costs.
In general, the hidden cost of in-house payroll lies in payroll technology with its upgrades and licensing fees, security needs, and maintenance via your IT operations. While salaries, benefits, training, and recruitment of payroll department staff are easy to track, the shifting IT needs of your operation tend to slip through the cracks.
The other side of the coin is that if you have adequately shifted to using payroll programs instead of manual operations, human error and inefficiency are hurting you and costing money.
Your payroll department needs space, uses electricity, and needs to have that “overhead” allocated to its costs. Add to those costs the occasional consultant at “occasional” rates.
And, when you outsource other accounting work and tax filing, you risk expensive non-compliance errors and have to deal with communication issues between your payroll department and your tax preparer. When you outsource your payroll to a trusted company that also does your bookkeeping, these problems are greatly diminished or even totally avoided.
Automated payroll processing is more efficient than manual processing. The problem is that the cost of the technology that you need may overwhelm your savings from switching to automation. Here is where outsourcing your payroll can be cost-effective. The folks who will do your payroll already have the technology that you need and because they use that technology for many companies, the cost is diluted substantially. As a rule, the technology cost of your payroll processing is about 20% less when you outsource. And, outsourcing also allows you to reduce staff which means salary, benefits, and department overhead. This generally gives you another 12 to 13% in savings. As such, you can commonly expect to save about 33% of the cost of payroll by outsourcing!
If you are considering outsourcing your payroll operations, contact us at Exigo Business Solutions today.
