No matter what business structure you aim to build, Payroll is an essential part of establishing your business. As long as it is not a one-man job, you will need to have a payroll system to get your employee/s their bread and butter, and for you to be able to run a successful company with satisfied employees, payroll management should be on top of your list of planning.
Throughout the years, businesses started to shift from manual payroll (performing tasks by hand, without the use of specialized software or automated systems) to automated payroll and that shift was necessary as it reformed the whole process into what it is now.
The shift from manual to automated payroll has benefited modern-day businesses in several ways. Most importantly, the significant reduction in errors in payroll processing and the minimization of the risk of inaccuracies in employee compensation. In addition to the fact that the use of advanced technology in automated payroll systems ensures compliance with tax laws and regulations, providing more efficient and effective payroll management, ultimately, leading to improved accuracy, efficiency, and time-saving for our current times
To help you understand more about payroll management, in this introductory article we will discuss:
- What is payroll management and what are its types?
- How Ovarc can help as an HR solutions company.
What is Payroll Management and What are its Types?
Payroll management is the administration of employees’ financial records including salaries, wages, bonuses, deductions, and net pay. It includes tasks like calculating employees’ pay, gathering the correct amount of taxes, distributing payments to employees, and maintaining accurate payroll records. It also involves compliance with tax laws and regulations that are related to employee compensation.
Considering the pros and cons of each, there are 4 types of payroll management and you can choose what fits you best considering your company size and current business status:
1. In-House/Internal Management
This payroll management option is optimal for businesses that are newly starting with a few numbers of employees. It involves using company resources, like personnel to handle payroll tasks themselves, like calculating employee wages, managing tax deductions, and ensuring timely and accurate payment to employees.
Pros of in-house payroll management:
- Direct control: Your company has direct control over the payroll process.
- Simplified process: The process is simplified for use by non-experts
- Cost-effective: It can be cost-effective for small businesses with a limited number of employees.
- Confidentiality: It ensures that sensitive payroll information is kept within the organization, ultimately lowering any security risk.
Cons of in-house payroll management:
- Time-consuming: It can be time-consuming, especially after getting assigned to company employees who can be more productive if that task is not theirs
- Expertise required: It requires expertise in payroll processing and tax regulations, which may be lacking within the organization.
- Compliance challenges: Keeping up with changing tax laws and regulations can be challenging for in-house payroll management.
2. Bookkeepers/Certified Public Accountants Management
This option is recommended for medium-large businesses. Using bookkeepers or Certified Public Accountants (CPAs) for payroll management can be very helpful, especially for businesses that require a high level of expertise and accuracy in handling financial records.
Bookkeepers and CPAs are trained professionals who can ensure that all payroll tasks, including calculating wages, managing tax deductions, and maintaining accurate payroll records, are handled with precision. Their expertise can also be invaluable in ensuring compliance with tax laws and regulations, ultimately minimizing the risk of errors and inaccuracies in employee compensation.
Pros of hiring bookkeepers or certified public accountants (CPAs) for payroll management:
- Expertise and accuracy: They are trained professionals who can handle financial records with precision, ensuring accuracy in calculating wages, managing tax deductions, and maintaining payroll records.
- Compliance assurance: Their expertise can help in ensuring compliance with changing tax laws and regulations, minimizing the risk of errors and inaccuracies in employee compensation.
- Time-saving: Outsourcing payroll management to bookkeepers or CPAs can save time and resources, allowing business owners to focus on core activities.
Cons of hiring bookkeepers or certified public accountants (CPAs) for payroll management:
- Cost: Hiring professional services will be more expensive compared to managing payroll in-house, especially for small businesses with limited financial resources.
- Dependency: Relying on external professionals may create a level of dependency, and if there are any issues or delays in their services, it can impact the business operations.
- Communication challenges: You might face challenges in communication and coordination, especially if the bookkeepers or CPAs are not physically present on the business premises.
3. HR Solution Companies Management
Utilizing HR solution companies for payroll management can be highly beneficial for businesses of all sizes. HR solution companies offer specialized expertise in payroll management, ensuring accurate and efficient processing of employee salaries, wages, bonuses, and deductions. By outsourcing payroll management to HR solution companies, you can save time and resources, allowing yourself to focus on core business activities.
Moreover, not only can HR solution companies help you with payroll management, but they also help streamline all your HR services and people operations needs, allowing you to focus on growing your business and leaving these tasks to the experts (a little bias is okay now and then)
Pros of using the help of an HR solutions company for payroll management:
- Expertise and specialized knowledge: HR solutions companies have dedicated professionals with expertise in payroll management, ensuring accurate processing of employee wages, tax deductions, and compliance with regulations.
- Time-saving: Outsourcing payroll management to an HR solutions company will allow you to focus on core business activities, saving time and resources.
- Access to advanced technology: HR solutions companies often utilize advanced payroll management software, leading to efficient and error-free processing.
- Reporting and analytics: Payroll management software usually includes reporting features that generate monthly detailed reports or analytics that are insightful for businesses.
- Compliance assurance: These companies can help ensure compliance with changing tax laws and regulations, minimizing the risk of errors and inaccuracies in employee compensation.
- Scalability: HR solutions companies can accommodate the needs of businesses of various sizes and scales, providing tailored payroll management services.
Cons of using the help of an HR solutions company for payroll management:
- Cost: Utilizing the services of an HR solutions company can be a little bit more costly compared to managing payroll in-house, especially for small businesses with limited financial resources.
- Dependency: Just like with depending on external accountants, relying on external professionals may create a level of dependency, and any issues or delays in their services can impact business operations.
- Communication challenges: There may be communication challenges when working with an external HR solutions company if their client/customer service department is incompetent.
4. Online Software Management
Using online software for payroll management can be beneficial for businesses of all sizes. It offers several advantages such as automation of payroll processes, accurate calculation of wages and taxes, easy access to payroll data from anywhere, and improved compliance with tax laws and regulations.
Pros of using online software for payroll management:
- Accessibility: Online software allows access to payroll data from anywhere with an internet connection, providing flexibility for work and on-the-go management.
- Automation: Online payroll software automates various payroll tasks, such as calculating wages, and tax deductions, and generating payslips, saving time and reducing the likelihood of errors.
- Compliance: Many online payroll software solutions are designed to stay up-to-date with tax laws and regulations, helping ensure compliance and minimize the risk of inaccuracies in employee compensation.
- Reporting and Analytics: These software solutions often offer clear reporting features, allowing businesses to generate detailed reports and gain insights into their payroll data.
- Integration: Online payroll software can integrate with other business systems, such as accounting software and HR management platforms, streamlining overall business operations.
Cons of using online software for payroll management:
- Security Concerns: Storing sensitive payroll data online may raise security and privacy concerns, requiring robust measures to safeguard against potential data breaches or unauthorized access.
- Learning Curve: Implementing and using new online payroll software may require some time for training and adjustment, especially for employees who are used to traditional payroll methods.
- Dependence on Internet Connectivity: Reliance on Internet connectivity means that any disruptions in Internet service may impact the ability to access and manage payroll data.
- Cost: While some online payroll software may offer cost-effective solutions, there could be subscription fees or additional costs for certain features, which may not be feasible for businesses with limited financial resources.
- Customization Limitations: Some online payroll software may have limitations in terms of customization, which may not fully align with the specific payroll needs of certain businesses.
- Time-consuming: It can be time-consuming, especially after getting assigned to company employees who can be more productive if that task is not theirs
- Expertise required: It requires expertise in payroll processing and tax regulations, which may be lacking within the organization.
You can also read: What is Payroll Automation?
How Ovarc can Help as an HR Solutions Company
According to research, 61% of companies outsource some or all of their payroll operations, 12% of companies worldwide fully outsource payroll, and 57% of companies say outsourcing payroll enables them to focus on the core business.
All bias jokes aside, if you thoroughly compare the pros and cons of each of the types of payroll management, you truly will find that HR solution companies are an optimal choice for all types and sizes of companies.
What could be a better option than laying back and only focusing on your technical tasks to grow your company and establish it in the business world around local and even international markets? Exactly. Ovarc can help you do just that.
We offer a fully digitalized platform that not only will help you with payroll management, we can also help automate your entire HR process. Starting from incorporation, payroll management, handling employee benefits, and even managing your company assets.
You can reach out to us through the following contact us page link to have a detailed discussion about the options we can present to make your life easier.
