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Outsourcing Payroll: The Pros and Cons

Payroll is an essential facet of every business. However, sometimes managing the payroll in-house can be a stressful, time-consuming, expensive and distracting non-core task. More than just juggling employee remuneration, businesses must stay on top of their industrial relation and statutory compliance, recordkeeping and data security. This can end up distracting management and staff from your wider business goals. Outsourcing payroll to professionals offers a solution to these hassles – but what are the pros and cons to outsourcing payroll?

Time and Resource Saving

Payroll is one of the largest time-hoggers for businesses. A 2013 survey by the National Small Business Association saw business owners rank payroll taxes number 2 on the list of “administrative burden”. Each pay run – normally weekly or fortnightly – requires a large amount of effort and meticulousness. Outsourcing payroll will not only save you time, but it will allow you to focus on your core business goals. There is the no need to employ a dedicated payroll employee, and HR and management staff won’t need to juggle financial and payroll matters on top of their already heavy work load.

True Cost of Processing Payroll

Closely linked to time-saving, is cost-saving. In-house payroll requires wages to be calculated, paychecks distributed, financial reports written, and payroll tax preparation to name a few. The time taken to do all of this can be costly. If you do your homework and find a company that tailor-makes their payroll services, the cost can reduce up to 50% cheaper than in-house payroll.

Modern Award and Industrial Relations Compliance

The modern award structures and industrial relations environment in Australia are complex, and constantly changing. Without a dedicated financial team, it is difficult to keep up to date with the regulatory compliance – and large financial penalties exist for mistakes. The hospitality group of celebrity chef George Calombaris was left red-faced in April after their internal payroll processes failed to classify employees under the relevant award. This resulted in the company underpaying staff by $2.6 million. Outsourcing to professionals guarantees that your payroll is adhering to current tax laws, and ensures a neat record of all payments made.


Data security is becoming an increasingly pertinent issue for businesses as it becomes harder to keep sensitive information secure online. Payroll providers operate on secure systems with redundant backup servers spread over several locations. They stay up-to-date with technology to protect your data, so you don’t have to.

Obviously outsourcing payroll means handing over very sensitive details, and reducing your oversite of financial matters. Hence, it is important when seeking to outsource payroll that businesses research potential candidates well. Take advantage of free trials, read company reviews, and even converse with other companies already utilising an outsourced service. Find the right service for your company, and reap the benefits.

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