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The benefits of outsourcing payroll services

The benefits of outsourcing payroll services

Why small businesses should outsource their payroll needs

Small businesses face many challenges on a daily basis, and business owners are often looking for ways to streamline processes and focus on the tasks that will have the greatest impact on their goals. One of the way in which a small business owner can keep focused on what s/he does best, is to outsource their payrolls, rather than learning how to handle it in-house. Here’s why this is a good idea:

  1. Reduce costs. Compare the amount of time that employees may spend learning how to do payroll-related activities, compared with how much time it takes to brief an outsourced payroll specialist to do it for you. Outsourcing payroll means staff are freed up to be more productive with their work; and expenses such as the cost of printing payslips, computer software, training and support are eliminated. There are a number of professional payroll providers who will offer packages are a reasonably low rate for smaller companies. Often these costs are a fraction of the money that will be saved by outsourcing the payroll duties to someone else. In South Africa, payroll fees depend on how many employees need to be processed, the number of third party payments that have to be made, the submission of EMP201s, etc. Prices range from around R50-R70 excl VAT per employee and fees will vary according to the type of services required. Some payroll specialists may charge an hourly rate of around R350.
  2. Reduce internal workload. Payroll can be a time-consuming task for many small businesses, particularly if it’s not something they are trained in, or is not the company’s core offering. There are various additions that must be taken into each payslip being written including benefit accruals, new hires and terminations, and PAYE and UIF deductions. Outsourcing the task of completing payroll allows employers to concentrate their efforts towards the tasks that are pivotal towards accomplishing goals. It also frees up time for the human resources department or accounting department and allows them to work on more strategic tasks.
  3. Eliminate the risk of errors and non-compliance. SARS charges penalties for errors, omissions and late payroll tax fillings, which can again add to costs. By outsourcing payroll, professionals will calculate the taxes due for payroll, manage the tax fillings and payments, while also covering the costs that are accrued due to any mistakes made. Outsourced payroll specialists are also always required to be up to date with the latest changes in tax and labour legislation – something a business owner will probably not have time to do. Leave it to the experts!
  4. Reliability. The one job of payroll companies is to ensure that payments are provided to employees on time and in the correct amount. This is an advantage for small businesses because more time can be spent on important tasks within the business and unforeseeable issues such as vacations and illnesses will not get in the way of employees receiving their payslips on time.

Payroll can be a bit of a pain and get in the way of important tasks needed to increase efficiency within the company. Outsourcing payroll eliminates some of the administrative headaches that small business owners face every month, while increasing the efficiency of the company at the same time.

Adapted for the South African market from an article by Jamie Simpson.

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