Protect your business and reputation with outsourced payroll
5 December 2022
Regardless of how big or small your business is, if you employ staff, managing your payroll is one of your most important tasks. However, it can be a source of endless paperwork and delayed payments as it requires significant time and effort and gives way to human error for a company that doesn’t have adequate resources. There isn’t a one size fits all approach to payroll but if you’re unsure where to turn for help then outsourced payroll, otherwise known as Managed Payroll, might be the right move.
Outsourced payroll can help you run a smoother and more efficient payroll process in your business that will not only help save time and money, but provide you with confidence in your ability to pay employees accurately, timely, and with no compliance concerns.
On top of the obvious benefits of saving time and money, and reducing legal risks, outsourced payroll can also help protect your business reputation, which can be irreversibly damaged through mismanaged payroll processes.
Business and reputational risks of in-house payroll management
While there are benefits for some businesses to use an in-house team to run their payroll, the reality is, many businesses don’t have dedicated payroll resources. This means employees are being taken away from the role they were employed to do and being given more administrative work and training for a role they were not employed to do.
Furthermore, when this critical function is left to employees who are not properly trained in payroll, you run a much higher risk of errors occurring, which can place a gridlock on operations and damage the reputation of your company. This in turn impacts the motivation and productivity of your employees, who are a critical asset to your growth.
As more and more businesses seek outsourced payroll, one leading reason for this trend is saving on time and costs. According to 2019 findings by the Australian Payroll Association, 32.5% of Australian businesses outsourced payroll, which rose from 24% in 2018. This means outsourcing payroll will continue to be the new normal as companies want more transparency and efficiency.
What could it cost your business if you choose not to outsource your payroll? Here are five risks to consider when deciding to invest in outsourced payroll.
1. Cybersecurity – keeping your sensitive data secure
It is essential that your business data security is monitored, kept up-to-date, and has contingency plans in place in case of breaches. More and more, cybercriminals are targeting small businesses, and a breach can happen at any time. Handling your payroll in-house means sensitive data about your employees such as bank accounts and contact information, could potentially be exposed.
There are specific and changing legal requirements for storing employees' sensitive data and if not adhered to, can lead to huge consequences including large fines, replacement fees, and of course, huge reputational damage.
Outsourced payroll service providers have the right software, tools, and updates in place to help minimise the risk of a cyber-attack. Additionally, they have risk management plans in place to act quickly if there is a breach.
2. Compliance requirements
Compliance holds businesses accountable for what they say and do. There are strict compliance rules for paying employees and storing their data. A business that isn't compliant risks not only negative exposure and losing staff, but can invite expensive and lengthy lawsuits from employees, unions, and governments. Owners, directors, and staff can all be fined for non-compliance.
To run in-house payroll compliantly, you will need to ensure your system can integrate factors such as record keeping, payroll taxes, social taxes, working hours, and overtime. For instance, Australian employers must consider the requirements of the National Employment Standards, where every employee has to access a minimum of ten employment entitlements. Under the existing employment laws, an employer can open themselves to an investigation in case of breach of any standards.
3. Consistency and accuracy
Consistency and accuracy in payroll build trust, respect, and ease in the workplace. If you are constantly missing pay-day or employees need to regularly check their payslips for inaccuracies, then your business relationship will be broken down over time. On the other hand, if you are late or inaccurate in tax, super, or other legislative payroll requirements you risk paying more in fines and potentially legal advice.
Payroll management is complex and requires an in-house resource with proven expertise in all aspects of payroll to avoid irregularities that cause anxiety, distrust and resentment among employees. However, a good number of companies, particularly small businesses, lack the budget to hire an in-house payroll specialist, which is where an outsourced payroll provider can step in to help ensure timely and accurate payroll calculations and avoid compliance and other operational risks.
4. Competitive labour market
If you have hired and invested in a dedicated resource to manage your business's payroll, you need to consider Key Person Risk.
With so much competition in the labour market currently, it’s critical that businesses not only value, listen to, and respect their employees but have processes in place that help ensure business operations can continue, with minimal disruption if staff leave.
Outsourcing your payroll can not only offer you a competitive advantage but provides the chance to focus on developing your employees' critical skills and competencies by allowing more time and resources to spend on professional development rather than in-house payroll management. Great workers want to work for businesses that not only offer attractive benefits but career growth opportunities, which are key for talent retention.
5. Disruptions to business operations
According to a QuickBooks study, 41% of business owners reported spending one week or more to prepare payroll. Internally managing your payroll leads to your time as an employer having more competing interests, which can be unproductive.
Interruptions to payroll management such as last-minute changes, staff turnover, and legislative changes can take up important business resources that take from regular business activities. This can create speed bumps in growth, and if there are constant disruptions this leads to mistrust from employees, harsher auditing, and public scrutiny, and as you try to scale, the risks are only increased.
When you engage an outsourced payroll provider, you get a professional end-to-end payroll service that integrates the latest technology and cybersecurity solutions and is up-to-date with employment regulations and compliance requirements for consistent and accurate payroll processing. With the right payroll provider, you should also be able to access flexible payment options and features to match your needs, which frees more resources and time to transform into the best employer and brand in the market.
What you can do to protect your business and reputation
Without a doubt, building a business is not easy with the time and resources it takes. Your reputation is also a big deal as it reflects on your employees, customers, and investors. So, what steps can you take to protect your business, so it can keep scaling upwards?
Keep your technology and data security up-to-date, efficient, and legally compliant. You can do this by outsourcing your cybersecurity or outsourcing your payroll. The government also provides tools and resources to protect your online business activities from cyber-attacks.
Have a dedicated employee, team, or service provider to ensure payments are made accurately and consistently. This will be beneficial to your valued employees, who will see you as a caring employer.
Understand that a security breach is possible and have a clear plan in place if this were to occur. You can work with a cyber-security expert who understands the ins and outs of a security plan and how to execute it to quickly recover any stolen data.
Stay up to date with compliance requirements, changes in employment legislation, and listen to your employees to take action on the struggles they have with payroll. This can simply involve regular compliance checkups, educating employees, and having an open communication channel allowing interactions and feedback.
Like to discuss outsourced payroll?
Outsourcing your payroll can significantly reduce business and reputational risk, but it's important to choose a Managed Payroll service that is specialised, transparent, and works with you so you can be sure that your risk is mitigated.
Findex is a trusted partner in helping businesses successfully manage their payroll. We customise our service delivery and support to suit your business needs and how you like to operate. And our transparent pricing model is simple and predictable, ensuring no hidden costs or surprises. To find out more or to get in touch with our payroll specialists, click here.