What’s Better, In-House Payroll or Outsourced Payroll?

No matter what business you run, how many employees you have, or how you decide to operate, there is one thing that every business needs to consider and that’s payroll. You have two options when it comes to your payroll, and they are to perform your entire payroll in-house or outsource your payroll to an external company. This article will look at which option is the most cost effective for businesses.

The legal side

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Payroll is no light hearted affair and there are legislations in place to ensure that businesses are using the correct procedure. This legislation regularly evolves and it is your responsibility, as a business, to keep up to date with any changes. If you want to do your payroll in-house then you will need to ensure that you know all the legislation and keep up with the changes. This takes up time, effort and money. If you outsource your payroll then you will not need to worry about legislation, as the company you outsource to will be responsible for keeping you in line with the law.

Staff costs

Perhaps one of the greatest costs to a business deciding to do payroll in-house are the staffing costs. It may be the case that you are fully knowledgeable of the payroll procedure, but if not, you’ll need to employ a couple of payroll whiz kids to help you out. This will result in your business having to spend funds on recruitment, training, salaries, holidays, pensions, and other general staffing costs. Using an outsource payroll company means you don’t need to have in-house staff or deal with the associated expenses.

IT expenditure

Aside from staffing costs, IT costs can also be quite substantial for those opting for in-house payroll. You will need to consider the costs for hardware, software, upgrades, maintenance, and other possible IT expenses such as on-going support. If you decide on an external company for your payroll, then you’ll be eliminating these costs.

Other expenses

There are a few other lesser expenses associated with in-house payroll. Stationery may not cost a great deal on its own, but when you consider that you will need to purchase items such as ink cartridges, paper, pens, envelopes, and payslips, then you can easily see where the costs begin to add up. Again, outsourcing your payroll rids you of these expenses.

In-house vs. outsource

Overall, outsourcing payroll can be a much more cost effective option if you only have a handful of staff. Of course external companies will charge you for their payroll services, but often the fee they charge can work out to be much more inexpensive than all of the costs mentioned here. SME’s will benefit the most from outsourcing, whereas larger companies with considerable staff levels will probably benefit from using an in-house team.