8 reasons why more Australian businesses prefer outsourcing payroll services

8 reasons why more Australian businesses prefer outsourcing payroll services

Outsourcing payroll is a preferred choice amongst many businesses irrespective of big or small. This is because of the advantages and convenience third-party payroll solutions give to the general operations of the business. According to a report by the Australian Payroll Association, it is estimated that 24.7% of all Australian businesses and 37.08% of Australian SMEs with less than 200 employees are now operating under an outsourced payroll model. The biggest advantage of payroll outsourcing is that it maximizes ROI, lowers risk, and is immensely easy and quick to implement. 

Symptoms of poor payroll practices:

There are typically three major things that contribute to errors in the payroll process:

    • people,
    • technology, and
  • processes

Highly skilled payroll professionals are in great demand in Australia but are very hard to retain and attract at the same time. Most payroll processes contain errors because the person processing the payroll function lacks knowledge, skills, and training. 

Following are the symptoms of poor payroll process and systems that need improvement:

  • There is a significant amount of manual work involved.
  • Managers and Employees complain of errors and delays. 
  • Frequent off-cycle payments are being made to fix errors. 
  • Information is not easily available and reporting doesn’t provide any valuable insights. 

If your payroll is related to any of these above symptoms then it’s time to think about outsourcing your payroll to a third-party provider. 

8 main drivers of  outsourced payroll services in Australia:

1. Pay compliance 

Australia is a very complex myriad of laws governing employment at both State and Federal level that covers workers compensation, superannuation, and taxation (including fringe benefits), jury duty, minimum pay rates, termination of employment, minimum terms and conditions, record keeping, public holidays, leave entitlements, privacy and the payroll function plays a key role in keeping abreast with ever-changing laws and regulations in ensuring compliance in all these areas. 

The Fair Work Act is the primary piece of legislation governing employment in Australia, with Modern Awards stipulating a safety net of pay and conditions in different occupations and industries and the enforcement of obligations under the act and Modern awards is with the Fair Work Ombudsman. 

The Fair Work Ombudsman is now targeting directors, franchisors, HR professionals, accountants, and payroll officers to make them potentially liable to prosecution in the event of any contraventions of the Fair Work Act by their franchise or business. To ensure payroll compliance, businesses and franchises now have to prevent damaging compliance arising issues such as workplace advice and provisioning payroll or partnering with payroll service providers. 

It is best suited to outsource your payroll to third-party providers so that you get access to specialized expertise to solve pay compliance queries and to get the best advice on practice approaches in managing payroll. 

2. Risk management

In addition to managing pay compliance, other risks that need to be managed are errors, fraud, security, and key person loss. Payroll fraud can cost businesses a lot of money and can rise in a number of ways such as inflating time or rates, ghosting, and redirecting funds. It can commonly occur where there has been a lack of control in places such as when there is more than one person involved in auditing and payroll processing. Small businesses usually do not have resources for both controls. 

To overcome these risks, businesses are partnering with payroll outsourcing firms. 

3. Save time:

Payroll is a tedious and complex task. If one person is managing the payroll process it can be a huge burden on the individual or team who have their hands full. This makes it best to outsource payroll processes in the hands of the experts while the team focuses on the core activities of the business. When you outsource payroll services to a third-party provider, you can focus more on other responsibilities that come along in running and growing your business. 

4. Save money

Other than just being the costs of in-house payroll staff, you also have to cover other overhead costs such as financing in-house payroll resources (salaries and on-costs), administrative overheads, ongoing training, and recruitment costs. Businesses can save significant payroll processing costs, up to 50% of the costs when they outsource payroll services.  

5. Better utilization of technology 

Many businesses now outsource technology so that they don’t have to invest in new technology for in-house purposes, especially when that technology isn’t related to their core business activities. Cloud-based systems have added the cost of maintaining in-house systems much less. New features in the payroll system now include time and attendance with real-time costing against pay conditions including awards, smart rostering tools, self-service for employers and managers. 

6. Focus on your core business 

Instead of focusing on payroll processing, businesses can shift their focus on the growth of their business by outsourcing payroll processes. Outsourcing payroll providers are well equipped with expert professionals who handle the payroll function efficiently. 

7. Improves security

Outsourced payroll service providers are equipped with the latest technology to handle payroll functions. Because of which the hurdle of security is eliminated. To become managing pay compliance, finding a good payroll service provider is the key where your data is secured and there is no loss of theft

8. Simplifies reporting and reduces redundancy

Payroll Outsourcing services offer complete transparency and accurate information at the time of reporting. In addition to this, they also reduce redundancy by improving the efficiency and quality of work delivered. Therefore, outsourcing payroll offers greater benefits and is the most preferred choice compared to the in-house payroll function. 

Outsourcing payroll services to third-party providers will ensure compliance and give you peace of mind at less cost compared to in-house staff. 

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