What Are the Key Differences Between In-House and Outsourced Payroll?

Payroll is one of those jobs that is of utmost importance but can quickly become incredibly complicated as you scale up. Most businesses will opt to perform the task in-house, which is a perfectly valid option, but if you aren’t prepared for the complexities involved, it can soon become overwhelming and even more so if you make a mistake and suddenly find the department for labor breathing down your neck.

This is why some companies will opt to outsource this job to those who are more au fait with the inner workings of how payroll works. In this post, you will learn about the main differences between the in-house and outsourced options so that you can come to an informed decision about which route might be best for your business.

Control Over Payroll Processes

The first thing to consider is how much control you want over the overall process. If you require a much deeper level of control, then outsourcing might not be the best fit since you will constantly be one level removed from those performing your payroll duties. However, if you want a more hands-off approach and don’t need a high level of input, then outsourcing can work best. It also depends on how you operate.

For example, according to this website, specific individuals may be freelance for all intents and purposes, but because they work mainly for one specific company, it might be more conducive to work under an umbrella company and outsource their own payroll needs to another company. To put it simply, it really depends on how much you want to oversee the process, and if you don’t need too much oversight, you are likely better off giving the task to someone else.

This all changes, of course, if you happen to employ a sizable accounting department already who are more than likely up to the job.

Cost Comparison

When it comes to making money, you can only really do so if you’re selling more products or cutting costs. While the former is out of the remit of this post, you could achieve the latter by the way you proceed vis-a-vis payroll. You will soon begin to see a pattern emerge throughout this post, which is that how much you save (if anything) will depend on a range of factors. For instance, if you have a large accounting department, it might not be a good idea to outsource a job that your team can already perform. Conversely, if you are a relative minnow in the business world, setting up a dedicated accounting department replete with costly accountants will probably cost far more than the outsourcing fee. There is also the consideration of software and skills to take into account, all of which can cost upwards of thousands of dollars each month to keep running.

Flexibility And Scalability Options

The primary advantage that outsourcing has over in-house operations is the ability to scale up moderately quickly compared to doing it yourself. Even if the company you are currently using is unable to meet your heightened demand, it’s not too taxing to find another that can.

Payroll is a complicated task that involves software, skills, and money. The choice to either outsource or keep things in-house will depend on your current situation and how much control you want to retain over the process.