[South Africa] The pros and cons of outsourcing payroll

Every business must maintain accurate and compliant payroll to remain on the good side of the South African Revenue Service (SARS), avoid instances of fraud or error and maintain good employee relations. Yet business owners want to minimise the time and money they spend managing payroll so they can focus their resources on growing revenue and profit.

A company can take two paths towards achieving the goal of running cost-effective payroll that meets SARS regulatory requirements: set up its own payroll team and systems or outsource payroll processing to an external service provider.

Both approaches have their pros and cons, The Bharat Express News explores them below.

Manage internal payroll

Many SME owners prefer to manage payroll services in-house because they want to maintain tight control over their finances and employee data.

If they already have a good administrative team in place, they can often handle payroll in-house at a lower cost than they would need to pay an external vendor. Here are some things for the owners of small and medium-sized businesses to keep in mind:

Pros

• Since cloud-based payroll software is so affordable these days, it might be more cost-effective to run the service in-house.
• You’ll have instant access to payroll data when you need it to, for example, make changes or additions.
• You will be in control of all processes and systems.

Cons

• You may need to train or hire people to handle payroll.
• Your finance team may spend much of their time on payroll administration rather than focusing on strategic growth.

Payroll outsourcing

Outsourcing payroll can make sense if you and your team don’t have enough hours in the day to complete this task.

Maybe you’ve just started hiring people and don’t have time to train a resource to handle payroll.

Or you prefer to use your time and resources to focus on business development.

Pros

• You can free up time and resources to focus on your core business.
• You can eliminate the need to train or hire in-house payroll staff.
• Payroll outsourcing can bring transparency and predictability to payroll processing costs.

Cons

• You will need to entrust sensitive personnel information to a third party.
• You won’t be able to access or edit payroll information yourself, which could lead to delays and additional layers of bureaucracy.

Choose a payroll outsourcing provider

So how do you choose a payroll provider? The answer to this question really depends on the size of your business and how much help you need with your payroll tasks.

If you run a small business, your accounting practice may be able to help.

Large companies with larger payrolls or international operations can turn to a payroll specialist with a multinational operation.

Consider:

• Does the payroll provider have a reputation for providing quality service?
• Does it use a modern payroll software platform?
• Does it have a proven track record of compliance, including the ability to protect employee data?
• How does its pricing compare to market and internal costs?
• What services do you need; maintaining employee records, generating payslips, making SARS payments?

Simplify compliance

Most payroll management work lies in monthly preparations, such as calculating hours, absences and bonuses for a mix of salaried and contract staff.

The good news is that automated software can take care of much of this work for you, for example:

• Registration of employee details.
• Working out employee salary and deductions.
• Transmit payroll information to SRAS.
• Calculate how much you owe SARS.
• Calculate amounts such as sick pay or maternity pay.

Choosing the right payroll software will help ease your worries about SARS regulatory compliance so you can focus on growth rather than administration.

Every business must maintain accurate and compliant payroll to remain on the good side of the South African Revenue Service (SARS), avoid instances of fraud or error and maintain good employee relations. Yet business owners want to minimise the time and money they spend managing payroll so they can focus their resources on growing revenue and profit.

A company can take two paths towards achieving the goal of running cost-effective payroll that meets SARS regulatory requirements: set up its own payroll team and systems or outsource payroll processing to an external service provider.

Both approaches have their pros and cons, The Bharat Express News explores them below.

Manage internal payroll

Many SME owners prefer to manage payroll services in-house because they want to maintain tight control over their finances and employee data.

If they already have a good administrative team in place, they can often handle payroll in-house at a lower cost than they would need to pay an external vendor. Here are some things for the owners of small and medium-sized businesses to keep in mind:

Pros

• Since cloud-based payroll software is so affordable these days, it might be more cost-effective to run the service in-house.
• You’ll have instant access to payroll data when you need it to, for example, make changes or additions.
• You will be in control of all processes and systems.

Cons

• You may need to train or hire people to handle payroll.
• Your finance team may spend much of their time on payroll administration rather than focusing on strategic growth.

Payroll outsourcing

Outsourcing payroll can make sense if you and your team don’t have enough hours in the day to complete this task.

Maybe you’ve just started hiring people and don’t have time to train a resource to handle payroll.

Or you prefer to use your time and resources to focus on business development.

Pros

• You can free up time and resources to focus on your core business.
• You can eliminate the need to train or hire in-house payroll staff.
• Payroll outsourcing can bring transparency and predictability to payroll processing costs.

Cons

• You will need to entrust sensitive personnel information to a third party.
• You won’t be able to access or edit payroll information yourself, which could lead to delays and additional layers of bureaucracy.

Choose a payroll outsourcing provider

So how do you choose a payroll provider? The answer to this question really depends on the size of your business and how much help you need with your payroll tasks.

If you run a small business, your accounting practice may be able to help.

Large companies with larger payrolls or international operations can turn to a payroll specialist with a multinational operation.

Consider:

• Does the payroll provider have a reputation for providing quality service?
• Does it use a modern payroll software platform?
• Does it have a proven track record of compliance, including the ability to protect employee data?
• How does its pricing compare to market and internal costs?
• What services do you need; maintaining employee records, generating payslips, making SARS payments?

Simplify compliance

Most payroll management work lies in monthly preparations, such as calculating hours, absences and bonuses for a mix of salaried and contract staff.

The good news is that automated software can take care of much of this work for you, for example:

• Registration of employee details.
• Working out employee salary and deductions.
• Transmit payroll information to SRAS.
• Calculate how much you owe SARS.
• Calculate amounts such as sick pay or maternity pay.

Choosing the right payroll software will help ease your worries about SARS regulatory compliance so you can focus on growth rather than administration.