The payroll run has arrived. Again.
If this statement causes you to break out in a cold sweat, this article could be for you, as we take a look at why it’s time you outsourced the payroll function of your business.
Yes, outsourcing payroll is available! And for those that knew it existed but couldn’t fathom handing over such an important task, let us show you how easy it is!
Firstly, there are major benefits of outsourcing your payroll, going way beyond the multitude of time you will get back and the dollars you will save:
Provides peace of mind
By outsourcing the payroll function you will have peace of mind, a mental freedom on many levels; the knowledge that your employees are going to be paid correctly and on time every pay run, regardless of staff absences or mishaps that occur in daily business life.
There is now a segregation of duties and confidentiality surrounding payroll and the personal data of your employees.
Ensures compliance
Payroll is always up to date with award rates, national payroll employee standards, Fair Work and payroll tax law.
All taxes related to payroll are lodged and paid on time including year-end payment summaries, and super is submitted and paid to all employees’ super accounts.
Increases business efficiency
Your employees will be happy as their pays will always be on time and correct. They will have access to their leave balances and super amounts and you can offer them flexible pay options to different accounts.
Employees previously tasked with payroll can now spend their time doing more productive tasks or revenue generating tasks such as customer service, sales or production.
Here’s how to outsource payroll
Step 1: Choose an experienced payroll outsourcing company.
Ask other business owners or friends if they can recommend an outsourcing payroll company or type in payroll outsourcing into google.
Interview several different payroll outsourcing companies, similar to hiring a new employee or consultant.
Once you have chosen three from your list, ask them for a fee proposal. Look closely at the costs and the breakdowns. Does it include everything you need to process payroll? Try to think about your future needs in line with your business plan – will they be able to handle your business growth?
Do they have sufficient resources? You want the new payroll function to run smoothly and without mishaps – you need to know if they have back up to cover their own staff issues or absences.
Are the payroll services handled in-house or do they outsource their services overseas?
Do they offer an online employee self-service and if so, what features do they include?
Ask them for references. They may be great with the talk and promises, but there’s nothing like hearing from their clients how their service levels really are.
- Ask these references about the times if/when things went wrong, were they proactive? Did they handle it, so it didn’t become your problem?
- Do they communicate well and often enough?
- What happened at year-end? Did they complete all mandatory tasks that come with finalising a year-end pay run?
- Were they proactive with new award rates, changes in PAYG and super?
If you’re new to payroll, read our guide to the Australian payroll system.
Step 2: Ask the right questions
Can they provide extra services around HR?
Do they have the resources and manpower to provide these services – such as employee contracts, leave entitlements, the many laws and regulations around employment and taxes? Your business may not need them now but in the future, as your business grows you may require help in this area.
What are their security processes?
In this day of hacking and heightened awareness of cybersecurity, you need to choose a payroll servicer who has secure systems and processes to protect the confidential information of your employees – names, addresses, tax file numbers and bank accounts.
Ask them what their internal control procedures are for protecting and sharing your data. What security standards do you currently follow for file transfer (SFTP etc.) and data encryption?
Are they compliant with GDPR privacy laws?
GDPR covers the EU and any companies who process the personal data of an EU resident, even if the company resides outside the EU.
GDPR impacts the way in which the payroll outsourcer collects and secures employee information so if you have employees that reside in the EU, GDPR needs to be adhered to.
Set up a process of how the payroll run will work
Once you have chosen your payroll service provider, you will need to set up a process for hand over. This will include a full list of all employees and their details.
- You will need to give the payroll company access to your payroll system if you are already using one.
- Working with your payroll outsourcer, set up a new process around timesheets, processing of leave and entitlements and commission payments, including a process for employees who resign. This should include the job function that will be responsible for this process.
- Advise current employees of new sign-on details for them to access their leave entitlements, payslips, super payments.
- Create a new induction pack for new employees so the process is smooth and new employees are paid on time.
- Arrange to meet regularly to discuss improvements with the payroll outsourcing, and to advise on new pay rates, superannuation or tax compliance changes.
- Set up a central place for all employee contracts – listing salaries, benefits, and conditions, so both the payroll company and your business can access them at any time for reference.
- Discuss which reports are needed and to whom they need to be emailed to on a regular basis – this may include a summary or detailed pay report, PAYG obligations, leave entitlements and superannuation.
- Develop a process for payroll obligations to the Australian Taxation Office and the payment details.
What’s the next step to outsource your payroll?
International Accounting Solutions can help you outsource payroll. Call us on +61 2 8298 5301 or complete the form on this page and we’ll get back to you.
All our accountants are trained and regularly updated on the complexities of payroll and can advise how you can seamlessly process your company’s payroll through a third party.
Further reading suggestions
Are you ready for Single Touch Payroll? Designed by the ATO as a new, simpler way to reduce your reporting responsibilities and compliance processes. Here’s our guide to help you get started.
On a roll saving your business time and money? Check out our blog on how to automate your accounts payable. From hours to minutes, you can save big!