Do HR Functions Still Outsource Their Payroll Services in 2022?

By 

Filip Dimkovski

 on September 13, 2022. 
Reviewed by 

Kirsty Macdougall

Two professionals having a conversation while seated at an office desk, with multiple papers, sticky notes, and a calculator on the tabletop.

Business owners are well-aware that managing a company's payroll is no easy task. After getting the job done, employees expect to be adequately compensated.

However, owners know that payroll management doesn't just refer to their salaries—it also consists of other inherent responsibilities, like handling employee benefits, paying taxes, managing withholdings and deposits, and more. This makes managing and tracking worker compensation very challenging.

Outsourcing and Automated Payroll Solutions

For this reason, more and more companies resort to outsourcing their payroll to third parties. In the last few years, business owners have started seeing the value of outsourcing their payroll responsibilities and not having to worry about the correct compensation of their employees.

In addition to payroll outsourcing, some companies are also opting for automated payroll solutions. In fact, the rise of such solutions is starting to become a problem for manual payroll systems, as automated ones are often cheaper and more precise.

Now, let's dive deeper into the world of managing payrolls and see what it's all about.

Value of Payroll Outsourcing in 2022

Getting your company's payroll managed by a professional brings significant value to the table. Here are some of the main benefits:

Outsourcing Saves You Time

One of the main advantages of outsourcing payroll services is saving companies valuable time.

In 2022, running a business consists of many aspects: managing sales, running marketing campaigns, keeping clients satisfied, and developing new products.

With their payroll operations outsourced, business owners can have more time to focus on these aspects without worrying about whether total payments were calculated correctly by the end of the month.

Outsourcing Is More Accurate

Payroll outsourcing doesn't just bring value because it saves time—it also drastically reduces the risk of errors (i.e., improperly calculating employee compensation by the end of the month). In addition to keeping employees happy, this helps you remain tax-compliant, as the right payroll solution will also calculate taxes for you.

Outsourcing Can Potentially Save You Money

Outsourcing your payroll responsibilities can save you more money than it costs.

Most business owners try to avoid having too many subscriptions, as it costs them large sums of money in the long run. However, an outsourced payroll solution can potentially cost you less than if you were to calculate the payroll yourself.

Furthermore, having to face a penalty that results from making a mistake isn't something that any business owner should face, which is why outsourcing payrolls might save you money.

Disadvantages Associated With Outsourcing Payroll

Although payroll solutions have positively affected the way businesses handle spending, they aren't without their flaws. These are some of the potential disadvantages of outsourcing:

Lack of Accountability

The first disadvantage of outsourcing services is accountability. Even though you'll leave payroll management in the hands of professionals, you won't know if they've done a good job until it's too late. Moreover, the company you outsourced your payrolls to won't be held accountable for a mistake—your company will.

Vulnerability

Keep in mind that you're also putting the integrity of your data at risk when using the services of a third party. This is why it's crucial to establish confidentiality when you start outsourcing payrolls, as confidentiality threats could permanently stain your company's reputation.

Ultimately, this makes your company vulnerable, so it's crucial to use a payroll solution with an impeccable reputation.

High Costs Involved

Lastly, it's worth noting that small to medium-sized businesses might not have any cost savings using an outsourced solution. The cost of payroll outsourcing can be quite high, and businesses that aren't in the top earning brackets might not be able to handle such costs.

The reality is that outsourcing your payroll operations isn't cheap, so unless you've got a complex financial structure, chances are you won't save any money.

Payroll Automation as an Alternative Solution

It's evident that outsourcing payrolls has both advantages and disadvantages. While it may be a great decision for larger businesses with thousands of employees, the facts say that small to medium-sized businesses probably won't benefit from payroll outsourcing.

This is precisely why automated payroll solutions for your designated payroll team have been drastically growing in popularity, as they offer the same benefits of payroll outsourcing with fewer shortfalls.

Should you be interested in adopting a payroll software solution, look at our articles on the best HR automated software for small businesses and our reviews of payroll software for more information.

Which Solution Is Best for 2022?

As of 2022, having an automated payroll service is usually a better option than outsourcing your payroll. This is because a streamlined automated solution saves you time while being much more accurate and customizable.

The pandemic has shown us that we need transparent payroll processes with remote access, which are essential to keep employees engaged and loyal.

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