What exactly is payroll?
Payroll can be defined as the concept of paying employees. If any enterprise has more than one employee, there will be a payroll system. When it comes to the employees or workforce, there is a direct relation between salaries and motivation. If the payment system is uneven, it will depict that the company is financially unstable. Any disruption in payroll may lead to non-motivated employees, inefficiency, laziness, and inability to meet deadlines. However, if efficient payroll solutions are in place, it becomes easier for the HRs to control and organize accounts.
Problems faced by SMEs
- Time-consuming process
Payroll is a highly time-consuming process. Even if the business uses the latest technology platform to process the payroll, it will remain tedious for the administration. Every month, the management will spend many hours processing payroll that could have spent managing other aspects of the business.
Spending a significant amount of time on calculating wages and deductions along with bonuses and other benefits while ensuring the enterprise complies with every central and state law is not an easy task. For small and medium enterprises (SMEs), time is money. Such businesses juggle between the management and strategic aspects on a daily basis. Taking time out for a recurring task like payroll management hampers the focus on the actual growth of the business.
- Manual payroll processing
Many businesses that decide to manage payrolls internally often go for manual payroll processing to avoid upfront investments. There is no doubt that payroll management platforms have high-cost attached to them and not every enterprise is capable of affording it in their initial stages. However, manually entering all the information of the employees and calculating the payroll process id highly prone to errors.
Even after spending hours completing the payroll process, the business may end up making a colossal blunder in the amount to be paid or fail to comply with the laws. There is always a possibility of duplication of records that may lead to paying an employee twice in the same payroll cycle that can lead to more significant problems for the enterprise. In short, the enterprise may end up losing money and have frustrated staff members. The easiest way to manage payroll is to outsource Payroll to a Third Party that will end the requirement of manually processing payroll every month.
- Forever changing payroll regulations
Payroll regulations on central and state levels are dynamic and governments update then regularly. To avoid any issue in compliance with the law due to changes in regulations, business owners have to stay updated about the changes occurring on the central or state level. Every sector has a different set of rules that they have to follow.
Most of the time, governments make minor changes that may affect only the industry your enterprise is associated with. Missing the new guidelines can put the business owners on the wrong side of the law, leading to significant financial losses. 3rd party payroll management services can help the SMEs to ensure compliance with the regulations.
- Payroll frauds
According to the studies, every business faces some type of payroll fraud during its existence. Some businesses get over them but some eventually shut down their doors because of the financial losses or loss of reputation in the market.
The frauds committed in the enterprises may include falsified commissions, faking injuries, especially in high-risk jobs, ghost employees, especially in enterprises that have multiple branches across country and more. Thus, it becomes critical for every business to implement a system that can avoid and detect fraud to reduce the losses. Choosing a Third Party Payroll service can help in reducing such frauds.
Different ways to manage payroll
Manual Payroll Management: For businesses that have fewer than ten employees, payroll management is comparatively easy. Such SMEs often opt for manual payroll management. In most cases, the main reason for choosing manual payroll management is cost-cutting, especially when the business is at its initial stages.
Someone from the management will calculate salary slabs and taxes while assuming they know everything about deductions and regulations. However, critical deductions like PF, leaves, etc. may get messed up in manual payroll management. Though the business owners will have full control of everything while calculating and managing payroll manually, they will be responsible for any errors made while finalizing payroll.
One of the main disadvantages while managing payroll manually is the liability that comes with it. Salary calculations often attract numerous errors if not done as per the regulations. The business owner may know the entire process of calculating payroll, but one error in entering the amount will completely change the result.
Hiring an Accountant: Hiring an accountant transfers the responsibilities of the business owner to the accountant. However, the accountant handling the payroll for an SME must be aware of the business and processes that run behind it so that they can manage the payroll accordingly. In the end, there will be a possibility of human error in this case as well. The process will remain slow as it is just like manual payroll management with an additional cost involved.
Payroll Management Software: There are end-to-end payroll processing applications available in the market for businesses of all sizes. The only problem here is to find the best payroll software for the enterprise. Payroll software should be able to take care of the minuscule details and save management’s time to check and verify everything. The administration will be in full control here, just like manual payroll management. These payroll solutions come with the option to calculate leaves, deductions, bonuses, and more while finalizing the salaries. The application updates everything automatically based on CTC, income tax to be paid, and TDS. Also, these applications ensure compliance with local and central laws. However, there is a chance that the company that provided the software stops operations, and the enterprise is left with outdated software after spending a hefty amount.
Third-party payroll management services: A third party payroll service provider offers well-organized payroll management services for SMEs. These service providers have dedicated teams that know the in and out of the majority of the businesses running in the market. With little research, an enterprise can find the best service provider that has experience in the same sector.
Why outsource payroll to third Party Payroll Agency?
For small and medium-sized enterprises, managing, calculating, and organizing the payroll systems can be stressful and time-consuming. In many organizations, payroll compliance responsibilities are with the HR department that increases the workload on them. The main aim of the HR department is to ensure the organization gets the best recruits and the current employees are satisfied with the company. However, in a lack of a dedicated payroll system or lack of support from a payroll service provider, it gets harder for the HR department to function at their best. Here are a few advantages of hiring a third party payroll service provider.
- Payroll management team
The most expensive part of any SME is maintaining the workforce. Third-party payroll agencies will reduce the load on the SME to hire salaried professionals to manage payroll. By picking up the right 3rd party payroll management company, you can reduce the payroll management cost substantially. Moreover, the HR executives will be able to focus on other important tasks in hand.
If an enterprise has bought a payroll management system, there is always a chance that it will get outdated very quickly. Many software solutions ask their customers to purchase memberships that ensure compliance with the latest regulations. However, if an enterprise fails to update the system for any reason, it may dearly cost the enterprise. Choosing to outsource Payroll to a Third Party will ensure the enterprise uses the best software for payroll management.
- Compliance with the regulations
There are protocols set by the central and state governments that every enterprise has to follow regarding payrolls. Hiring a third party will ensure the enterprise is 100 percent in compliance with the latest regulations.
- Additional services
Third Party Payroll services provide additional services like auditing, data security, and so on.
Benefits of outsourcing payroll services for SMEs
For any business, time means money. For SMEs, time is everything and even a single second waste sometimes costs heavily in the long run. In many SMEs, the HR executives often end up spending crucial hours on payroll management that could result in important work being piled up in the background. By hiring the right third party payroll management services, time management becomes easier and efficient.
In-house payroll management means a dedicated team or person just to manage payrolls every month. Even if he or she spends a week finishing the payrolls, the enterprise will have to pay for the whole month. It is financially not worthy of spending that much amount when you can hire a third-party service to provide for a lesser amount.
Third-party payroll management services have a dedicated team of individuals that are well versed with the regulations in different sectors. Also, their systems are highly secure and chances of any miscalculation or mismanagement are almost nil. Most of the service providers do not store the data of employees rather provide cloud-based gateway services where the classified information is stored in an encrypted format.
- Communication and information
The third party payroll service provider makes sure to communicate with the enterprise regularly to ensure the flow of information. Most of them have a notification system that can be accessed through a customer panel. Business owners can check payrolls using the dedicated customer panel anytime from anywhere.
Third-party payroll management services go a long way
In today’s time, HRs working in SMEs cannot afford to spend time and energy on managing payrolls. Every second they spend on calculating payrolls can be well spent on other aspects. Lack of payroll support from an agency will lead to an additional workload on the HR department that will cause long term problems in managing the workforce. A third-party payroll management service provider will remove the load from the HR’s shoulder and ensure full compliance with the state and central laws.
From auditing to payroll management, everything will get streamlined that, too, at affordable prices. For HR professionals, payroll management services are the best way to manage the employee records and ensure every query related to the payroll is solved in time.