Weighing Up the Risks & Benefits of Outsourcing Payroll
Being aware of the risks of outsourcing your payroll is important for any business to understand. If you choose to go down the route of outsourcing, be mindful of these issues when considering which company to choose.
Key Risks of Outsourcing – Why People Choose Not to Outsource Payroll
1. Choosing an inexperienced company
Inexperienced staff in charge of the outsourced service negotiation leads to a poor contract. A lack of preparation can result in a contract which does not reflect your specific needs.
2. Potential incomplete transfer of payroll data
Transferring payroll data to your outsourcing service is a vital aspect that comes with several risks. Incomplete transfer of payroll data means that the payroll outsourcer’s staff don’t have the capability or information to handle unique challenges faced by the business. Incomplete data transfers, along with poor access will compromise service delivery during transition.
3. Loss of relationships with payroll staff members
Outsourcing your payroll naturally saves money, but often comes at the cost of staff. Loss of personal relationships with payroll staff members can lead to employee dissatisfaction. It is essential to manage employee expectations of how the service will work, and what will be different in the new outsourced world.
4. Disturbing the interim payroll function
From an operational perspective, losing key payroll staff during the implementation phase will impact the quality of the interim payroll function, and possible future productivity of the department. It is important to make sure that all stakeholders are engaged and on board with the new outsourcing arrangement. Existing third party providers in another part of the business may not want to collaborate with a new outsourcing provider.
5. Accidental non-compliance with legal responsibilities
It’s worth remembering that your legal responsibilities as a company won’t cease just because you’ve chosen to outsource your payroll. This means that you must ensure communication remains consistent with your supplier. Ultimately, you are responsible for your business remaining compliant with legislation, so it’s important to know who is accountable for what.