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The Pros And Cons of Payroll Outsourcing

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Are you contemplating whether or not payroll outsourcing is right for your company? Your decision likely rests on two key factors:

  • What’s going to make the process straightforward and less clunky
  • What’s going to make it easy and actually usable by your staff

Two significant aspects to look for when deciding if it’s worth outsourcing is the time it will take for implementation and the return on investment.

Payroll outsourcing is a common practice in the business world and refers to using third-party service providers to oversee and handle payroll’s administrative and compliance aspects. This means everything from filing payroll taxes to making payments on behalf of the company. In other words, your payroll provider has your back!

Let’s dive into the pros of considering this payroll outsourcing as an option:

Saves You And Your Staff Time

Studies conducted by Technology Advice show that 26% of small businesses spend an estimate of 5 hours monthly processing payroll manually.

Unifying the payroll process creates a smoother and less time-consuming workflow from beginning to end. This is not surprising as your employees now only have one system to clock in and clock out, request vacations, log sick days and receive accurate paychecks each pay period.

Reduces Costs

Return on investment is a crucial factor and the reason why your organization was set up in the first place. Statistics from Greenhouse show that businesses save an average of about $97,180 annually from outsourcing their payroll function.

This is expectedly linked to the fact that you’ll be reducing the amount of time spent on processing payroll manually. Let’s not forget the fact that you’ll have more time to focus on revenue-increasing and value-adding activities, rather than mundane payroll tasks.

Trusted Expertise

Your payroll provider will pay attention to intricate details and stay up to date on any legislative changes you might be missing, as the costs of making errors or not complying can be costly.

Regulatory bodies must know precisely what money went where. These types of payroll mistakes can be pretty tricky to identify and correct. Non-compliance comes with significant penalties like huge fines and other repercussions. Practice makes perfect, and as this is the specialty of the service providers, they know just what to look out for.

Though there are many pros to payroll outsourcing, there can be a few cons as well, such as:

Cost Of Payroll Services

A payroll services provider will definitely not be getting the tools and technological solutions for free. A good number of payroll services require a price ranging from $10 to $85 monthly on top of a per-employee monthly fee.

This does not include the cost of integration as well as any additional creative services either. Therefore, cost is definitely something to consider, although there’s every chance this cost would be lower than the cost of processing payroll manually for your organization.


Though this is rare, packages and outsourced payroll providers do not come with a “100% accountability guarantee.” If the payroll service provider flops and cannot pay business taxes on time, this can hurt your organization and cause it to be vulnerable to fines and penalties.

Are you still contemplating whether it’s a splendid idea to outsource payroll? Consider the risks and benefits for your business carefully. Lurking issues like confidentiality and security protocols are understandable reasons why you might not buy the idea of outsourcing. The good thing is, this cause for concern can be rectified with the right service provider providing the right solutions for your business.