How to Choose Between In-House Payroll and Outsourced Payroll Services 

Omar Visram
How to Choose Between In-House Payroll and Outsourced Payroll Services 
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After just two paycheque problems, nearly half of all workers say they would look for a new job. So compensating employees for their work properly and on time is one of the most important functions of HR, finance or administration. You might handle payroll internally, which does allow for more control over the process and data security. Alternatively, you can let an outsourced payroll services provider in Canada do all the hard work for you. The benefit with that approach is saving time and labour resources. This blog post weighs the pros and cons of both methods. 

Payroll Control and Customization 

Keeping the payroll function in-house means you retain more control and can customize the process as you like. For instance, you can choose the right payroll software for your organization and decide how to issue payments to employees. You'll be in charge of every element of payroll, increasing transparency in your organization. 

Admittedly, you won't get this much flexibility when outsourcing payroll to a service provider. A third-party company will have its own workflows for gathering employee information and calculating payments, meaning you need to relinquish control of your payroll process. However, outsourcing can be very beneficial if you want to reduce the strain on internal resources and capacity and ensure your payroll is as accurate as it can be.

Time and Cost Savings

Perhaps the biggest benefit of using a specialized provider of outsourced payroll services in Canada is the time savings these companies provide. According to a 2019 QuickBooks study, businesses spend 4 hours and 52 minutes calculating, filing, and paying payroll taxes during every pay period. That's 253 hours a year. When you delegate these tasks to an outside company, HR, finance or administrative teams can spend their time on other priorities. 

Outsourcing payroll can also save you cash. With another company handling this process, you don't need an in-house payroll team at all. You also don't have to spend money training internal  employees to manage payroll processes or handle vacation coverage for when payroll-focused staff is away from the office. 

That said, payroll outsourcing isn't always the most cost-effective method for all companies. Providers will charge you a fee for their services, so it’s important to undergo a cost/benefit analysis for your organization.

Data Security 

Outsourcing payroll involves sharing internal employee data with an external company. This information includes social insurance numbers (SIN) and bank account information. If a provider of payroll services doesn't take data security seriously, that information could be at risk and fall into the wrong hands. It's important to check how an external company handles and stores your company's - and employees’ - data. 

When you keep payroll data in-house, you don't have to worry about how another company will use that information. However, it’s still critical to keep that data secure to minimize the risk of a breach or another type of cybersecurity event. Otherwise, you could jeopardize your business reputation. Depending on your industry and location, you could also receive fines for not complying with data protection laws. 

Advanced Support and Expertise

The best payroll services providers have years of experience in taxation and compliance. You can leverage these resources to increase the accuracy of your payroll processes and stay on the right side of the law. For example, a specialized payroll services provider can ensure you pay the correct amount of payroll deductions. As a result, you can avoid underpayment penalties and audits from the Canada Revenue Agency

External companies can also support your payroll efforts. If an employee has a query about the amount of tax they pay, they can contact a representative from your service provider rather than an internal team member. 

In-House or Outsourcing: Which Payroll Method Should You Choose?

Whether you decide to handle payroll internally or use a service provider depends, in part, on the size of your company. If you have a small business with only a few employees, keeping the payroll function in-house might make sense. That's because it should be relatively easy to collect employee information, calculate earnings, and issue payments on time. Larger companies, however, might struggle to handle payroll responsibilities for dozens or hundreds of employees. In these cases, a service provider can free up your team’s time and reduce complexity. 

Your budget is another factor to consider when deciding whether to outsource payroll or keep it in-house. Outsourced payroll providers obviously charge for their services, with a price range depending on the level of service provided and a variety of other factors. However, as previously mentioned, tapping into external payroll solutions could save you money on internal labour. 

Think About the Requirements for Your Business

Paying employees the right amount of money at the right time is incredibly important. Depending on the requirements of your company, you can either manage payroll yourself in-house or use an external company to do it for you. 

While payroll outsourcing could provide time and cost savings and advanced expertise, keeping this function in-house allows for more control, customization, and data security. So it’s important to weigh the pros and cons of both methods to decide what's best for your company. 

Are you considering outsourcing your payroll function to a trusted provider? Enkel can help! Contact us to find out more about our accurate, on-time, and cloud-based payroll services in Canada for companies like yours.

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