All About Payroll Outsourcing
Payroll outsourcing defined
This is basically when you hire a separate payroll service in order to do the payroll for your business. This outsourced payroll company will ensure the following:
Payments are always made on time based on worker contracts.
Each payment that is made must be done in compliance with the law.
There must always be proper paperwork to support the payroll.
Any payroll service provider that you use must only make payments to your business’s employees. There are those who think that outsourcing this as well as HR services will enable you to hire new employees, but that isn’t the case. It is possible for a payroll service to also offer HR services, however, in most cases, payroll services typically only deal with payroll.
If you are looking for a global company that provides the best of the best global payroll services then look no further than TopSource Worldwide.
The inner workings or outsourced payroll
You should understand that when you hire a third party service provider, you will need to provide your confidential worker’s details with them. So, make sure that there is a good DPA in place before you do so. This will help to prevent any possible legal problems in the event that the outsourced company doesn’t properly handle your company’s payroll and employee information.
Some of the employee information that the payroll company will require include:
Rate of pay
Date of hire
Contract type and more.
In the event that your employees utilise time tracking software or even time cards to record working hours, then the payroll company will need access to that information so that they can easily calculate the payments that are owed and make sure the payments are sent out via direct deposit or check.
Next, these payroll companies can also deal with your payroll taxes, ensure your company is compliant with the tax regulations in your area and even if you have employees that work from different areas and even remotely. However, you will have to provide the needed data on your employees such as their ITINs, social security numbers as well as deliver particular tax forms to your employees.
Some of the steps that payroll processing will have are:
A setup time frame: once the payroll company is given all the information that they need. You will also need to provide confirmation on the working hours and pay rate for each staff member.
With a payment period, the payroll company will need to know how many hours each employee worked so that they can use this information in their software so they can determine their salaries that have to be paid. It is important that you provide confirmation of this information.
In the calculations for gross pay, the payroll company will need to perform post and pre-tax deductions if they apply. Some other things they will need to take into consideration include child support, taxes, benefits and more.
In the calculation of net pay, the company will have to send checks or make deposits to your employees. They will also have to handle other payments such as taxes.
You will get payroll reports for every cycle as the owner of the business.
Payroll outsourcing options
There are many studies which indicate that more businesses will outsource their payroll needs to payroll companies. The number of companies who have switched to outsourced payroll companies in the last 5 years have also significantly increased. There is also even more interest in these type of services and therefore, payroll companies will definitely become even more popular in the future.
At the moment, you can select from the following:
Getting a full service payroll company. When you go this route, your business will benefit from the wide range of experience of payroll professionals and ensure you’re tax compliant.
Getting a Professional Employer Organisation (PEO). With this option, you’ll also gain Human Resource services. Do note that this would be more costly.
Buying payroll software. This isn’t seen as full outsourcing since you’ll need to figure out how to use the software. However, it is a better option than dealing with your payroll manually or using Excel.
Getting a contractor accountant. This is beneficial for a small business as it is cheaper than an employee. However, if you want to hire a contracted accountant, ensure that your contract is clear so that there aren’t any problems with misclassification.