Top 5 Reasons Why Startups Outsource Payroll
One of the most important decisions that the founders of the startups need to make is – Should we manage payroll & compliance in-house or should we outsource it?
Based on my interactions with owners of several startups, here are the top 5 reasons why startups decide to outsource payroll.
Time to focus on core business – Unless you are a payroll company, it doesn’t make sense for you to spend your time in building and managing a function that isn’t driver of your growth.
Instead, you can spend the same time in generating more revenue for your business, recruiting top notch talent, finding board of directors, or investing in research and development. Following laws and answering queries of employees about taxes is a very time-consuming task and it’s best left to the experts.
No risk of penalties from government – It is extremely tough to keep your business compliant with laws because they keep on changing every now and then. If you have your office in multiple locations, it becomes even more challenging because each state has its own labour laws and there are different formats to file taxes.
If you make a mistake, the government can leave heavy penalties on your business which might result in a significant loss of money and might even put your business at risk.
But, if you work with an outsourced payroll provider, the agency will hold the complete responsibly of keeping your business complaint with all laws. And if they make a mistake, they bear the liability and not you.
Timely payment of salaries – If your HR goes on leave at the month end due to an emergency or if the HR leaves the company, you might struggle to pay salaries on time.
And based on several reports and surveys, your employees are more likely to quit the company if they don’t receive salary on time or if they receive inaccurate salary.
A payroll vendor makes sure that the employees always receive accurate salaries on time.
Access to expertise – Payroll is more than just paying salary to employees and taxes to government on time. Because payroll agencies work with hundreds and thousands of companies from various industries, they will be able to help you in implementing the best practices of the industry in your company.
E.g. they will help you in structuring the compensation of your employees to help them save more tax which will be beneficial for both the employees and the company.
Employees will take home more salary and will be happier. As a result, the employees will likely stay with the company for a longer duration and be more productive at work.
Access to latest technology – When you work with a payroll agency, they will help you in using the latest technology such as cloud based payroll software with employees self-service.
All your employees will get a login from where they can view their pay slips, apply for leaves & expenses, and submit income tax declarations.
Basically, the whole process will become more transparent and will enhance the confidence of employees in your company because they will have real time information about their salary and other things.
The agency will also help you in implementing integrated one stop solutions instead of buying independent products such as leave management system, attendance management system, time sheet software, etc.
To sum it up, outsourcing payroll has several advantages and is only getting more popular with time.
Do let us know how you manage your payroll in the comments. And if you have outsourced it, what were the main reasons?