Irrespective of the number of employees, payroll processing is a must for every business. A perfectly structured payroll system ensures timely salaries for all the staff, which, in turn, keeps the workplace environment positive and healthy. Businesses either keep an in-house team for payroll management or outsource the service.
While both methods have distinct advantages and disadvantages, outsourcing payroll can help you save considerable time and money that you can spend on other important business operations. Payroll outsourcing has become increasingly common among Australian businesses because of its easy-flowing nature and other benefits. As you will go through this article, you can learn more about this alternative.
What Is Payroll Outsourcing?
When the payroll processing is carried out by an accountancy firm or a specialist payroll service provider, it is called payroll outsourcing. Some businesses also prefer a payroll co-sourcing model. Here, the responsibilities are shared between both an internal team and a third party.
One point you remember is that some professional bookkeepers also handle payroll processing. But, whether you should go for a bookkeeper or a payroll company to get the job done, first consult your small business advisor.
Payroll Functions That Are Usually Outsourced
When you outsource payroll for your small business, they will perform the following functions for you.
Set up payroll accounts for your employees
Separate payroll accounts are required for all the employees. So, in the first step, payroll professionals create these after gathering all the necessary information.
Set up a payment method
Whether they will receive direct deposits or get payments through paychecks will be established by the professionals.
Withholding all applicable income and payroll taxes is another responsibility they take over.
Manage employee deductions
The payroll professionals will also manage specific employee deductions, including health insurance and workers’ compensation.
Manage tax forms and declarations
The payroll service provider also manages tax forms and declarations at the end of the financial year.
Keep in mind that even if a payroll company does the job for you, it will be your duty as a business owner to remit taxes to the Australian Taxation Office (ATO).
How can outsourcing payroll benefit you?
If you consider payroll outsourcing services for your company, you can enjoy the following benefits. These will be important for your business to meet financial goals.
Payroll specialists will handle the whole process
Payroll experts who hold proper expertise and skills will look after the whole process. Remember that they have received formal training to do this job and have gathered different experiences throughout their career so far. Because of the accuracy they offer, there will be fewer mistakes regarding payroll tax filings following the regulations of both federal and state government and tax benefits.
Knowing the payroll processing in the safest hands will reduce your stress, and you will concentrate more on your business operations.
Your company’s payroll processing will remain compliant with the law
There are many complex laws in Australia that cover minimum pay rates, minimum terms and conditions, employment termination, leave entitlements, workers’ compensation, privacy, jury duty, record keeping, and superannuation and taxation (including fringe benefits).
The primary Australian law that governs employment in Australia is the Fair Work Act. Under this law, company directors, HR professionals, accountants, franchisors, and payroll officers can be prosecuted if their businesses are found to violate terms and conditions.
When the payroll is outsourced, experts will take care of the whole thing, ensuring your business stays compliant with the regulations. They can also give you priceless suggestions on how to approach.
There will be a smarter use of technology
Small businesses sometimes subscribe to multiple technological solutions for accounting, rostering, HR, payroll, etc. or use only the basic payroll features of the accounting software they use. This way, they are deprived of enjoying the benefits of the latest technological advancements found in the leading payroll solutions.
But payroll professionals nowadays use advanced software that delivers the most accurate information and ensures maximum security for employees’ information. As a significant quantity of personal data is attached to payroll processing, it is now a must to use advanced software for your payroll. Payroll Outsourcing also minimizes the risk of internal data fraud and identity theft.
It will help you give more priority to your business
If you ask your small business financial planner to tell you one benefit of payroll outsourcing, they will undoubtedly point out the ample time it saves. As payroll is not a core function, it will be better to leave it to an outsourced company to have more time to plan and implement business strategies.
It will also save you money
An in-house payroll management team will cost you more compared to a payroll outsourcing service. You can save as high as 75% of your payroll overhead expenses.
If you are at the beginning phase of your business venture, it will always be better to consult a business advisory service in Perth. They can give you valuable advice on how to take the approach to payroll outsourcing.