Many business owners would raise an eyebrow at this statement. You can’t possibly consider outsourcing something as critical as your payroll to a third-party, right? Wrong, and here’s why. How well have you kept on top of changes in the payroll, compliance, tax, and legislative landscape in the last decade, let alone keeping pace with all the new technologies?

During this time business owners and payroll, practitioners have endured numerous amendments to the Labour Relations Act and Basic Conditions of Employment Act, taxation laws continue to evolve, not to mention the introduction of the Employment Tax Incentive (ETI), the introduction of the Protection of Personal Information Act (PoPIA) imposing significant new compliance pressures on employers demanding new submissions deadlines and reporting requirements.

South African employment-related legislation is evolving rapidly and is ever-changing and it’s becoming almost impossible to stay on top of changes and new legislation that’s making compliance increasingly daunting. Failure to comply leads to serious repercussions and hefty fines with a zero-tolerance approach from the authorities to ignorance.

It’s not all doom and gloom if you discover the many benefits that come with outsourcing your payroll. We haven’t heard of business owners who are not keen on saving money, regaining focus, and increasing productivity, and that’s only a few of the many benefits to outsourcing your payroll.

Here are some of the other key benefits to consider.

Cost Savings

You may ask yourself how it’s possible to save money when outsourcing the company payroll, isn’t this an additional expense? Consider for a moment how much of your own time is spent on processing and finalising the company payroll. How much of your very limited working hours are spent on dealing with the payroll as opposed to focusing on growing your business, improving productivity, and most importantly increasing your bottom line. As a business owner, your most important resource is your time, and ask yourself if you’re managing it effectively by personally having a hand in processing the payroll.

Payroll outsourcing companies can assist in greatly reducing the cost related to payroll processing, dealing with payroll related queries, and the headache associated with trying to keep up with the compliance and legislative landscape.

Yes, massive enterprises can probably afford to maintain large payroll departments, but they are under pressure most of the time, and for many, keeping up with changes in legislation is equally daunting.

Conversely, SMEs with under 250 employees are burning money trying to take on this task and there is a massive opportunity to save money by outsourcing it. A quick calculation will prove our point. Add up the labour cost of all the hours spent on payroll activities, staying on top of legislation, inputting payroll data, dealing with payroll queries, doing various manual calculations, monthly payroll variance checks, third party payments and the list goes on.

Increased productivity and regained business focus

Ask yourself what an additional sale is worth to you and how much time you need to devote to obtaining another sale? Payroll processing inside of your business is a time-consuming task, keeping track of terminations, new starters, various deductions, garnishees, leave administration, compiling the EMP201 submission, the UIF declaration, and then we haven’t even looked at the time required for dealing with tax year-end, employment equity and the annual COIDA submission. If you could take the time spent on payroll-related activities and reinvest it in growing your business, payroll outsourcing has paid for itself ten times over at least.

If you missed a deadline, SARS isn’t that forgiving, and paying interest is one thing but the associated late submission penalties are hefty.

Outsourcing your payroll requires minimal consumption of your time and you’re assured of never missing a submission and payment deadline.

Lastly, you no longer need to pay software licence fees, upgrade fees, and subscriptions to maintain a payroll software system. All of this is handled by your payroll outsourcing partner.

Security and Confidentiality

Managing an in-house payroll brings with it many security concerns that you probably haven’t considered.

A key concern and proven vulnerability are questions around where your sensitive payroll data is stored to the risk that lies in identity theft and embezzlement to internal threats like disgruntled employees leaking sensitive information.

Many business owners say they have trusted employees that have been in their employment for many years. Even with long time trusted employees, there is always a risk of identity theft, embezzlement of funds, or tampering with company files for personal gain. Also, how safe and secure is your payroll data, does it reside on the company server or network? Does the IT staff potentially have access to it, and how much have they managed to uncover regarding the earnings of various high-level employees?

Most payroll outsourcing providers use industry-leading cloud payroll solutions that keep data safe and if they’re a switched-on bunch they can easily identify and alert clients to various types of payroll fraud. The industry-leading cloud solutions used by trusted payroll outsourcing providers offer data encryption of the highest standards and regular backups across multiple server locations.

Keeping up with legislation

Payroll outsourcing providers invest time and funds on the legalities surrounding payroll, compliance, and taxes. If your payroll outsourcing provider is worth their salt, they are members of professional associations such as the Payroll Authors Group of South Africa (PAGSA), ensuring that they are always current on the latest legislation and aware of upcoming legislation thus eliminating payroll and legislative surprises.

Penalties relating to errors, late submissions, or missed tax filings can be very costly. Payroll mistakes are painful, and in South Africa, angered employees are a whole different kettle of fish.

Remember that payroll is the reason a payroll outsourcing provider exists, and reputational damage greatly impact the trust of existing and future clients, they will ensure they invest in keeping their knowledge up to date and continue to provide exceptional service. Like many other job functions, expertise is a major reason you’re paying a payroll outsourcing company.

Innovation and Creative Thinking

Creative thinking and new ideas in payroll management is another benefit of outsourcing your payroll and it is something that many business owners don’t even think about. Consider for a moment how busy life as a business owner is, where on the priority list is there time to think about or embrace new ideas and innovation in payroll management and payroll processing. The role of the payroll practitioner and payroll processing itself has evolved considerably as is the case with the role of an accountant as an example.

Let the “tech” work for you

If it isn’t broke, don’t fix it is the approach for most business owners when using the words technology and payroll software in a single sentence. Getting the best out of the technology through the implementation and use of time and cost-saving features is something that is very seldom explored. This is simply due to getting caught up in the day-to-day drudgery of payroll data capture, checking, and processing. Payroll, payment, and submission deadlines don’t always allow for exploring new and better ways of doing things. Payroll outsourcing providers or payroll bureaus do this on an ongoing basis and this continuous search for a smarter and more efficient way of doing things is a key component that companies and employees can vastly benefit from.

 Access to industry best practice methods

Many payroll outsourcing providers manage the payroll of multiple clients. Through years of diverse payroll processing and payroll management experience across multiple payrolls of varying sizes spanning different industries, you’re assured that they’ve “seen it all” and they’re very unlikely to be new to any potential problem or query that comes their way. This level of expertise is hard to come by.

 Access to data insights & analytics

Payroll outsourcing providers subscribe to reporting tools that provide for deeper and more detailed insights and analytics on payroll data. These reporting tools provide their clients with insights and analytics that don’t come as a standard feature on many payroll systems. Having fielded questions from many clients over several years and understanding the intricate details of running payrolls, clients are spoilt for choice with an array of additional analytics.

Payroll outsourcing providers can transform payroll data into valuable insights using dashboards allowing clients to perform detailed trend analysis and easily identify potential risks. Powerful tools allow for various sets of dashboards and intelligence that can be sliced and diced across multiple filters and variables to ultimately provide a Human Capital “Crystal Ball”.

Some analytics available at the click of a button normally include:

• Monthly Overviews and Board Packs
• Headcount, Demographics and People Movement
• Cost to Company, Turnover Cost, and Other Cost Reporting
• Audit Packs

In closing the company payroll is often a secondary task in the eyes of business owners or an HR employee if they are tasked to take care of it. Payroll isn’t a massive and detailed subject in either an HR degree or when studying to be an accountant, yet payroll is massively intricate and legislation surrounding payroll is ruthless and errors are expensive.

In-house employees tasked with payroll are more likely to make mistakes, spreadsheets are often deemed suitable payroll systems, and payroll itself, not the primary responsibility.

Payroll providers are dedicated and focused on this critical ingredient of a successful business and it is their primary responsibility. They are not only well versed with regards to employment-related legislation, but they are also experts in the software and technology they employ ensuring your payroll runs like clockwork with every pay run.