Benefits of Outsourcing Payroll Services

6 min read|Last Updated: August 1, 2024|

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Outsourcing payroll management gives businesses additional time to focus on core functions and simplified payroll activities, making it a compelling alternative to maintaining an in-house team of payroll outsourcing professionals or investing in complex and costly payroll software.

Running an in-house payroll in Singapore is time-consuming and challenging, especially for small to medium businesses lacking HR and accounting professionals. Ensuring a transparent payroll management system that complies with Singapore’s Employment Act requires significant efficiency. Consequently, many companies opt to outsource their payroll activities to mitigate penalties and expenses, as it is more efficient and cost-effective.

What Is Payroll Outsourcing & How Does Payroll Outsourcing Work?

Payroll outsourcing involves hiring an external processor to handle payroll tasks, including taxes, direct deposits, garnishments, salary adjustments, and calculations. Outsourcing allows businesses to save time and money by reducing paperwork and HR hours spent on payroll tasks.

Businesses can choose to outsource all payroll functions or select specific tasks such as payroll taxes or direct deposits. The decision depends on the business’s size, complexity, and needs. While larger companies benefit from outsourcing for financial and operational reasons, small to mid-size businesses can too. Professional payroll providers stay updated on changing regulations, making them a wise investment for any business.

How Much Does Outsourcing Payroll Cost?

When a small business owner hires help with payroll, they might pay various fees, depending on the outsourcing agreement, to streamline their payroll needs. Some of these fees depend on how many people are employed by the business and the frequency of payroll periods. Other fees might be for extra services like setting up employee benefits or providing reports

Benefits of Using Payroll Outsourcing Services

1. Minimise Compliance and Regulatory Risks

Regulatory changes that affect payroll happen at the speed of light, which can make staying compliant extremely challenging. In Singapore, companies have to comply with complex legislation and regulations. The Employment Act here protects employees’ rights by making sure payments are done in a timely manner and outlines relevant duties employers should do.

For employees lacking a formal contract, the act mandates written records with key employment terms (KETs), along with itemised pay slips and mandatory contributions.

As there are many formulas involved in payroll management, it is easy to make mistakes which can cause costly problems. By outsourcing your payroll services in Singapore, you minimize exposure to compliance and regulatory risks as the provider handles it all.

2. Minimise Expenses

The direct expenses incurred by processing payroll in-house can be greatly reduced by outsourcing it to a payroll outsourcing service provider. This is particularly true if your business is an SME with limited resources and a small workforce. If you compare the expenses of doing payroll in-house to outsourcing it to a team of professionals, your business will be saving a good amount of money that can be invested in computer equipment, software, training, etc.

Some of the activities that the service provider would be covering include

  • Payroll calculation
  • Signing and distribution of cheques
  • Calculation of taxes and returns
  • Reporting of new hires and terminations
  • Training and support among many others

Since time is money, especially for a small or medium-sized organisation, you will be avoiding expensive mistakes in payroll processing by outsourcing these activities, giving your business more opportunities to grow in other avenues.

3. Provided With Self-Service Feature

Most payroll management platforms operate as self-service systems accessible 24/7 via dedicated mobile or web applications. An integrated service featuring employee self-service options enables the human resource department to save time and costs. Employees can independently manage common tasks, including:

  • Logging in to their personal account to view their salary details which include reimbursements, benefits, deductions, and leaves are calculated into their pay.
  • Printing their payslip when and if needed.
  • Checking their leave application status and the number of leaves that they have for the rest of the year.
  • Checking and printing their tax-related documents
  • Updating their personal information, including contact details and address.

4. Increased Security

Payroll processing involves inherent risks, including the potential theft of personal information, which can result in significant financial losses. While employees are generally trustworthy, extensive monitoring and security measures are necessary to mitigate these risks.

Without adequate security measures, tampering with company information or misappropriation of funds can occur, leading to substantial losses. Payroll service providers are responsible for implementing robust security measures, including state-of-the-art technologies that raise timely alerts in case of any fraudulent activity, minimizing the need for constant manual intervention.

Furthermore, data storage and protection measures, along with multiple server locations and backup facilities, help prevent payroll fraud effectively. Such advanced measures require significant investment, which may not be feasible for small businesses to implement in-house through manual bookkeeping.

Outsourcing the payroll function to a reputable vendor ensures access to advanced technological systems that can effectively prevent fraudulent activities, making it a prudent decision for businesses of all sizes.

5. Professional Team Of Experts

Outsourcing payroll accounting gives you access to professional team of experts who study and research a lot about government regulations. Renowned payroll service provider agencies have an experienced team of experts who can manage benefits and deductions in payroll system.

Besides, workers compensation, addressing employees concerns and human resource in general are taken care of pretty well by the team which is an added advantage for you as a business.

While searching for a good payroll service provider, you should also find out if they have a 401k plan to offer. These transactions are an inextricable part of system and hence the inclusion of the plan will take you a long way.

6. No Infrastructure or Maintenance Costs

In-house payroll management means investing in paid software plus upgrade costs. Since you need the latest tax tables installed on your systems all the time, that’s an extra time and money consuming strenuous activity, you can’t evade; however, by outsourcing you can say goodbye to these maintenance and infrastructure cost woes with utmost ease.

7. Better Experiences for Scaling Teams

Processing payroll and maintaining compliance standards is difficult for overwhelmed payroll departments, especially if their organization is growing quickly. This overwhelm can often lead to payroll delays and mistakes.

If your business is growing, you need a payroll provider that can grow with you. By outsourcing tasks, you can ensure your payroll is getting the attention to detail it requires to run smoothly. Your in-house accounting team can instead focus on core tasks to support your team as you grow.

8. Build Payroll Continuity

Some companies operate payroll systems that require staff to be on-site in order to process payroll. If unexpected events occur, such as payroll staff being unable to work or a key member resigning, ensuring timely payment becomes challenging. Outsourcing payroll to experts ensures continuity and guarantees consistent, accurate payroll delivery, meeting employees’ primary payroll needs.

9. Reduce Stress

Accurate and timely employee payment is vital for business success. Payroll experts are essential in preventing costly errors, particularly amidst regulatory complexities and workforce expansion. In-house teams often struggle with managing payroll efficiently while navigating local compliance and growing employee demands. Outsourcing payroll to specialists alleviates these challenges, ensuring smooth operations and compliance adherence.

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FAQs

How do you find the right payroll outsourcing services for your needs?2024-05-14T11:05:34+08:00

Costs and fees: payroll outsourcing company should always present its offer and costs transparently. Any hidden costs may lead to you ending your business relationship, so thoroughly vet your options before you engage them.

Compatibility: Determine if the payroll provider is compatible with how your company handles payroll. They may not be a good fit for your business if you’re uncomfortable with their processes or values, especially when considering the data security and compliance aspects of payroll services.

Support: Ask how the payroll company will help you manage garnishments, sick leave, benefits administration, and other factors.

Self-service: Check if the company offers specific self-service options, which can help you manage a large workforce. For example, having employees sign in to a program and upload their tax forms can be a great time-saver.

Reporting: Ask the payroll company what reports they provide—for example, if they provide fiscal year-end reporting. You’ll want to track your payroll system’s efficiency and check if everything is going according to the plan.

Can my employees use payroll software, too?2024-05-14T11:04:37+08:00

Yes, they can, and it’s one of the biggest benefits of outsourcing your payroll to a payroll service provider. Plenty of payroll processing programs allow self-service, which can significantly impact employee satisfaction, as employees can make time-off requests or obtain personal payroll information more freely and flexibly.

When should you keep payroll in-house?2024-05-14T11:04:08+08:00

Generally, outsourcing payroll can be a time-saving and cost-effective solution if you:

  • Have several employees whose working hours vary every week
  • Can’t justify the expense of buying payroll software to use in-house, particularly for small business owners looking to optimise their payroll needs.
  • Often hire foreign contractors

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