What is Payroll Outsourcing

By Ken Zwerdling on Oct 08, 2017

What is Payroll Outsourcing

Payroll Outsourcing is used because the management of global payroll functions can be a time-consuming and complicated process as businesses must keep track of rotating personnel and the ever-changing landscape of tax regulations. Payroll outsourcing is the term used to describe when one business contracts another business to take care of the company’s payroll and all of the related functions. Outsourcing can greatly simplify the payroll process and free up more time for a business’ core work.

Some companies choose not to outsource payroll because by maintaining those jobs inhouse, often it keeps costs lower, and this may be true for businesses with relatively consistent pay disbursement. For most businesses though, each pay period is different according to the myriad amounts paid out to the various employees.

Payroll agencies offer many services such as: calculating wages and salaries, withholding income taxes, distributing funds to the appropriate government agencies, printing and delivering checks, direct deposit, and providing management reports. These services come with many benefits to companies, the largest being the amount saved in time and expenses. Even with the smallest in-house payroll department, there are still demands for equipment, decent software, training for proper usage of the software, and constant maintenance to keep records up-to-date. Another significant benefit is that businesses no longer be concerned about paying IRS penalties for late payments or miscalculation errors as payroll agencies bear the responsibility for making payments in full compliance with the latest tax laws and in a timely manner. Outsourcing also spares the company from needing to update payroll software or deal with technology difficulties, ensuring that employees are always be paid on time.

Within the domestic territory, payroll outsourcing can be very beneficial and then on a global scale, it can be even more so. Paying employees who work in other countries greatly complicates the payroll process, especially when your company is new to the international country. The extra benefits from contracting a payroll agency in different countries include gaining access to familiarity and expertise with local laws and adapting to cultural nuances regarding employee pay. 

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