It is not an easy task to decide whether to opt for an in-house payroll or to have an outsourced payroll. One wrong choice can cost you thousands of bucks. Since it is a complicated matter, a lot of questions need to be answered before making a final choice. In order to ease the decision-making process, we have compiled some important aspects that you must consider before going for an in-house or an outsourced payroll.
Have a quick glance over some important factors that might assist you in deciding which one should you prefer.
Control Over the Pay Process
If you want to have control over the timings and want to have the liberty to make changes easily then in-house payroll would be more appropriate for you. Making changes is more cheap and easy with in-house payroll software for business management. Also if you have collective bargaining agreements or other rules that are subject to a frequent change then go for in-house without any doubt.
If we talk about the outsourced payroll, even after giving up control over the process you will still be needed to double-check the information. Moreover, the last-minute changes would be difficult to make.
Frequency of Payment to Employees
In case you have different groups of employees that are paid at different time intervals, the in-house payroll would be convenient for you. However, when there is one pay cycle to be administered, you can opt for outsourced payroll software.
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Last Minute Pay Checks
With an in-house payroll facility, you have to pay a license fee based on the number of employees and hence you can easily process the last minute as well as off-cycle payments. But with the outsourced payroll, it might be difficult to process the last-minute pay as you would be required to pay more cost.
The Complexity of the Payroll
Having a complicated payroll in the organization makes the processing of data more difficult. Many companies have to make most of the calculations on their own before submitting the final amount to the bureau. If you have to handle most of the calculation before handing it over to the third party then in-house payroll software should be chosen. Another advantage is that when you have full control over the payroll data, you can make new reports without paying an extra amount to access your own transaction history.
Good Understanding of Payroll
It is very important to have someone in the team who possesses a clear understanding of the HR payroll so that the potential errors can be unveiled. There are certain skills needed for this like tracking legislative updates, bargaining agreement interpretation, and monitoring compliance. When you don’t have anyone with these skills, it makes sense to outsource the payroll rather than choosing an in-house arrangement.
Number of Accounts on the General Ledger
The in-house payroll carries a full-fledged financial system, the transactions can be posted directly to the ledger account and the accounts are payable within a few minutes. So if there is a high volume of ledger accounts or the cost of the employee’s pay needs to be divided between two projects, an in-house payroll would be more suitable for the company.
Record of Payroll Transactions
For some companies, it is a matter of high priority to be able to audit changes in the payroll information. With an in-house solution, you will have access to all the changes being made along with the details of the person who has made those changes. However, with an outsourced payroll, you may have to request the bureau for the reports and that too with additional payment.
Final Words
There isn’t any specific answer to this question because a lot of factors are involved in the matter. Both the options have their own advantages and disadvantages. The in-house payroll offers more flexibility in making changes while the outsourced payroll helps you in handing over the work to a third party thereby reducing your efforts. So it all depends on the scale of your business operation, workforce, and requirements of the organization. We hope that after going through the aforementioned factors you might have got a better picture of the whole scenario.
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