Payroll Outsourcing Vs Payroll Software (In House)

Are you a small business owner that has a few employees? Or are you a medium size enterprise with a decent number of employees in various departments? Perhaps you are running a business in a labour intensive industry.

Look no further! Whether you are from a small or medium size company, it is quite likely that you will face the issue of payroll. In this article, we will explore what is payroll outsourcing and what is an in-house payroll software, how they can help your business and the pros and cons of each solution.

What is Payroll Outsourcing

Payroll outsourcing, to put it simply, is to engage an external vendor to execute your payroll function. A professional vendor will likely have the capabilities to perform full function of your company’s payroll, including computation, pay adjustments, CPF contributions, salary disbursement and provision of pay slips. By engaging a professional vendor, you would have to confirm the salary amount of each employee every month and they will be likely to take care the rest of the procedures.

These professional vendors, usually accounting or consulting firms, will make use of payroll software for the computation. The deliverables will likely undergo reviews and checks by trained professionals who are experience in the field of payroll before submission to business owners for a final approval. Most professional vendors are either accredited Human Resource (HR) Professionals or professional accountants.

What is Payroll Software?

Payroll software is a software use primarily to compute and manage remuneration matters of employee. Most local softwares in Singapore are already finetuned to incorporate Singapore-only requirements. Examples include CPF, certain statutory ceiling and other levy (such as skilled development levy otherwise known as SDL). By purchasing a payroll software for in-house usage, you will require an employee to manage your payroll function. The skillsets required will largely depend on the complexity of the payroll transactions.

Payroll Outsourcing Vs Payroll Software – Which is better?

It is difficult to have a definite answer but there are some points for every business owner to consider while making a decision.

Cost: Payroll Outsourcing is a fuss-free process where the whole payroll function is migrated to the professional service provider for a fee. This fee of outsourcing is likely to be more expensive than simply acquiring a payroll software as the vendors would require some form of service fees for their professional input and review. In-house payroll software is likely to be much cheaper but you will require to employ a new employee or assign an existing staff to be in-charge of this software. There could be training cost involved as well. Do also note that there are certain accounting software that offer payroll function, thus reducing the hassle of system integration.  

Expertise: Payroll Outsourcing is likely to be fuss-free and even if there is any change in statutory requirements, business owners are unlikely to be overly concerned. For statutory changes that might affect the business, payroll service providers are likely to provide timely updates to business owners. For other changes, these professional service providers should be well versed and is obligated to ensure all payroll matters are in compliance to the most updated requirements. On the other hand, if business owners opt for an in-house software, the employee that is responsible for payroll matters would be the primary person to rely on for any questions or changes in payroll legislations/requirements. Despite software capabilities, there are still other areas which may require human intervention and knowledge to resolve. Such scenarios are even more prevalent in industries that have complex compensation packages.

Experience: Professional service provider tends to have multiple clients which broaden their perspective. This could be in the form of best practices, industries norm and also payroll trends. By engaging in their service, business owners inevitably tap on the service providers’ experience and may enjoy certain knowledge and experience sharing. For a payroll employee that uses your in-house payroll software, he or she may too be a highly experience individual based on past resumes. Nevertheless, business owners should make a decision that is best suited.

Scalability and continuity: If you are running a small business with limited employees, it makes little sense to have an in-house payroll system and staff to oversee such a minute function. The cost will be overly significant. If your business were to expand and headcounts increased considerably, it will be too untimely to seek for a solution when that happens. Having a professional service provider allows you the flexibility to scale due to your business needs. Similarly, having a professional firm to service your payroll function is also likely to minimize disruption. Imagine if you have an in-house employee overseeing your payroll function and this position faces 2 turnovers in a year. Partnering with an accounting firm or a payroll consulting firm will likely reduce the occurrence of such disruption.

Conclusion

While there could be other factors up for consideration, we feel that these 4 points are the key factors to consider when a business is contemplating between engaging a payroll outsourcing firm or purchasing a payroll software and performing this function in-house. There are pros and cons for each decision and it boils down to the company’s resources and planning. Payroll outsourcing services is unlikely to be a standalone function in today’s market. Many professional firms offer packages such as book-keeping, taxation, corporate secretarial services alongside with payroll outsourcing as a bundled service, keeping cost competitive while not sacrificing quality and accuracy.

Business owners who wish to find out more about payroll outsourcing may consider reaching out to us or view here! We would love to have a conversation with you to explain more about what we offer. Apart from payroll outsourcing, we do offer compensation and benefits planning and HR Consulting services. Do contact us now for an obligation free consultation.

References

https://www.staffany.com/blog/payroll-software-trend-price-singapore/

https://aspireapp.com/blog/payroll-software-for-small-business

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DISCLAIMER: The views and opinions expressed in this article are those of the author and do not necessarily represent the views and opinions of any individuals or organizations with which the author may be affiliated, either in a professional or personal capacity, unless explicitly stated.

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