Time is an invaluable resource that small businesses must protect at all costs. But there’s also another critical resource that’s as important as time – money. So when deciding on their payroll management, they get caught in between these two resources. They don’t understand that money and time are interrelated. But, if they do it right, they will be able to save both.
So instead of wasting your time on something you have little to no expertise in, you can consider hiring someone else to do it. It will not only help you save time but also money. In addition, you can use the time saved to enhance efficiency, which in turn will increase productivity.
Payroll Management Services
What is payroll management? What do these agencies do when you outsource the job?
Payroll management is all about administering employees’ salaries, bonuses, deductions, net pay, and other financial records. According to recent amendments to Singapore’s Employment Act, it’s mandatory to maintain and keep employee records. It includes payslips and other key employment terms (KETs). Not abiding by these might result in severe penalties. Thus, many small business owners opt to outsource payroll systems to avoid these regulatory difficulties.
Hiring a payroll vendor who is professional, knowledgeable, and reputable is the key. Also, to help you decide on the right payroll vendor for you, we have listed down some of the other important points that SME owners should look into while outsourcing their payroll operations.
Importance of Outsourcing for SMEs
If you haven’t figured out that managing payroll in-house is a time-eater, you’re doing it incorrectly. So although you would be saving some money, you would actually be wasting your precious time.
If you instead outsource the duties, you will be able to spend that time handling pressing issues of your business. Maybe you could use that time to develop a strategy to boost the profit margin or expand the target market. Initially, managing the payroll might look like a petty task, so you believe it’s better to do it yourself. But the risks and challenges associated with the payroll system are considerably huge. The minutest of mistakes can cost you a lot.
The activities include keeping up to date with the amendments of the law, data processing, employee requirements, and much more. Don’t they sound tedious? These duties will eat up your time, so the better choice is to outsource it to a reliable agency.
Reduces Financial Risks and Saves Money
How could it save money when you are hiring an agency to do it for you? Sometimes, the money you save doesn’t directly relate to expenses. It could be other factors like an increase in revenue, cost reduction, and so on. Therefore, you can’t directly witness the money saved. But if you think it through, your business’s overhead cost will reduce when you hire experts to do the job. It will save you time, which means you’re saving money.
Another significant importance of outsourcing payroll management is that it reduces financial risks. If not done right, you might end up paying heavy tax penalties and get caught in other related legal issues. So if your business is doing payroll management, think about the consequences. It’s not something you can procrastinate and do only when you have time; instead, it demands commitment and timely execution.
This is why outsourcing is a better choice and works like a charm. For example, the agency or third party that takes up your company’s payroll management duties will offer tax guarantee advantages. This means, if anything goes wrong and creates a legal risk, they will take responsibility. Be rest assured, penalties won’t empty your company’s pockets.
Yes, you have to pay to the third party or agency, but the risks and costs involved with in-house payroll management are higher.
The next reason why SMEs should outsource payroll management is that they can get experts on board without hiring them as full-time employees. You do what you’re great at, and just like that, payroll vendors do what they’re great at. When people specialize in something, they reach the highest level of it.
So if you outsource payroll, you don’t have to worry about installing the latest payroll software or staying ahead of the tax tables. The third-party company would do it for you. They would have it prepared, and they’d be ready to handle it if problems come up. On top of all, you don’t have to squeeze your brain about Singapore Central Provident Fund and Skill Development Levy Rates because the experts have it sorted.
Letting the experts handle what they are good at lets you ease up and breathe. You will be able to focus better on the essential things that will push the business to a better standard. If you make sure to select a reliable vendor, you’ll get experts to handle your company’s payroll. These professionals know payroll management in and out and would ensure there are no discrepancies when it comes to payroll.
Data security is one of the crucial things in any business. It doesn’t matter what size your business is. You must make sure that your data is protected. In-house payroll is pretty risky because of this. There is a high chance for theft as the people who handle the payroll system know the ins and outs.
Also, your company’s network or server should be safe enough to save your employees’ data. You must ensure that the server is flawless and there aren’t any loopholes for data theft. However, instead of focusing on and dealing with all these, you can outsource the payroll. If you hire an honorable vendor, you will also receive encrypted software with top-notch security. It will ensure that your employees’ data is safe. They also make sure to have data backups if in case you lose your data.
As payroll management is their primary service, they do it with perfection.
Alleviate Payroll Mistakes
Rectifying mistakes is always frustrating. Errors related to payroll are not petty because they harm your business’s reputation. You also lose money and time – two significant resources precious to any business.
If you are not cautious, these mistakes might impact your employees and their performance level. If the employees are not satisfied with the workplace, it will affect your business. You will be faced with penalties and fines. In simple terms, as a business owner, you shouldn’t burden yourself with complicated laws and regulations related to payroll. If you are ready to give complete attention to handling the legal aspect of payroll, then it’s all good. But if you will provide only 50% of your attention, outsourcing is a better choice.
The payroll vendors excel in these areas because they dedicate all their time and energy to these tasks. In addition, as they are experienced in the field, they can do it perfectly, so you have nothing to worry about.
Should You Consider Payroll Outsource or Keep it In-house?
Although you should know the importance of outsourcing payroll, it’s equally important to understand its cons. Once you know both sides, you will be able to weigh them and make an informed decision. You shouldn’t blindly decide to outsource payroll without analyzing whether your business needs it. If you outsource your business’s payroll, the following risks will tag along:
Responsibility is Still Yours
Just because you outsource your payroll doesn’t mean you have no responsibility. You’re still responsible, and the payroll vendor might make mistakes too. If you find tax violations, you can issue a fine, but things get ugly when the law isn’t practiced right.
This is why you should be careful when selecting a partner to handle your company’s payroll. Check whether they abide by the laws and go through their track record. Spend time to settle for the right payroll vendor.
Out of Control
Business owners often think that payroll management goes out of hand when they outsource it. Yes, it does. You lose control of it, and you can’t handle problems in real time. So it has to come through the agency.
However, if you’re vigilant, you could handle this differently. You need to communicate with the agency promptly. Discuss and manage things according to the agreed time. This will prevent errors and delays. On top of all, it will help you be in control.
Data is at Risk
Yes, we said your data is protected when a third party handles payroll. But it’s only when you hire the right agency. There are so many agencies out there, but not every agency is reliable. This is why you have to be extremely careful when you outsource.
When a third party gets involved, the risk increases. Your company’s information is out there, which might backfire if things don’t go smoothly. This is why you have to keep them in check. Don’t forget to have a contingency plan in place to cater to your needs if their business model or situation changes.
When Should a Company Outsource the Payroll?
So when should a company consider outsourcing? This, too, has to go through a few filters like every other business decision.
The deciding factor is research. You have to compare a few service providers before you settle for one. It’s crucial to weigh the benefits and drawbacks of outsourcing payroll for your company. You should also focus on your current business plan and status. When you do this, you will be able to decide whether your company should outsource or not.
If you have decided to go on with the decision to outsource, how do you do it? You can start by making sure that the service provider is reliable. It’s vital to do a thorough background check, even if someone else has referred the service provider to you.
It’s not wise to keep your company’s reputation and security at stake just because of referrals. Thus, make sure to do your research before hiring a third party for your company’s payroll.
But if you decide to do it yourself, there are some easy-to-use payroll software available in the market that you can leverage. They would make your task simple and streamlined. Here is our compilation of the top 10 payroll software in Singapore.