The Disadvantages of Payroll Outsourcing

January 24, 201712:25 pm3541 views

Along with increasing complexity of the HR function within an organisation, outsourcing HR could be a good alternative to help the department get their job done better. Instead of investing your time on administrative tasks and paperwork, it would be more effective if you delegate non-core tasks to outsourced HR professional.

Besides other back-office functions, outsourcing payroll could be one of the best options to streamline financial management and allocate resources. However, with all the advantages outsourcing has to offer, HR leaders must bear in mind that behind every plus, there could be some minuses as well.

If you are planning to outsource HR for managing payroll operations, then here are some disadvantages that you should consider:

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You could lose some control

When you have decided to outsource payroll to get the task done on time, you should be ready to let go and lose some control over particular financial information and data of the company.

At some point, you might lose access to certain data since the outsourced companies would like to copy it in their records. Therefore, it is important for companies to create an authority guideline on what part of payroll data can be outsourced and what cannot.

Additionally, not only you might lose control, you must be responsible for anything this plan of action might bring as well. For example, if you have asked the outsource payroll to calculate and pay legal taxes, however if they are late to accomplish this task which is now beyond your control, then you must be willing to take full responsibility of the penalty for the delays.

You will be exposed to confidentiality threats

Information and data confidentiality is paramount for every successful business. If confidential corporate and payroll data is leaked to third parties, then it would be risky to maintain sustainability of the business.

Meanwhile, payroll function is closely related to employee’s personal and confidential data. If such kind of material is circulated or leaked to third parties,then it could pose significant threat to data leaks.

Therefore, companies must be careful enough to ensure that confidential data within the company is well protected. To prevent undesirable incidents happening in the future, companies must enter into a confidential agreement with the third-party service provider about the penalty terms and conditions before assigning tasks to them.

You have to pay extra

While at some point in time, outsourcing HR can help boost company’s efficiency and productivity, to make sure that the cost paid for the services offered is worth the gains. Hiring outsourced payroll service provider means you should allocate more money to the function, which could have been done by in-house employees.

Things could go worse when payroll companies offer all-inclusive package with services that you do not really need. To solve this issue, it would be better to work with an outsource provider who can tailor-offering to customise with needs of the business. Before entering into a contract, make sure that there are no hidden fees you have to pay half-way.

You cannot manage the quality

Sometimes, the promise is different from the actual result. Every now and then, the work quality varies from time to time. For example, you might find that the employees’ salaries do not comply with the guidelines, or taxes that are not deducted correctly.

To avoid misunderstandings which might arise from errors like this, HR leaders must ensure that the outsource payroll work quality always meet the business standards.

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