What should I do myself, what should I outsource? This is a question every entrepreneur asks himself, from small businesses to CEOs of a DAX company. Usually, companies are more willing to outsource a service the further away it is from their own core business. It is already clear at this point that payroll outsourcing occupies a special position in these considerations. Payroll accounting is neither part of the core business of a self-employed master mechanic nor of an international car company. Nevertheless, a large corporation is almost naturally assumed to create these itself. In small companies, on the other hand, it is common to assign this task to the tax advisor or another service provider. The larger a company is, the more inclined it is to count the entire payroll accounting as one of its own core business tasks. Between the car repair shop and the large corporation, there is a wide range of medium-sized companies of different sizes, where it is not always obvious which path they should choose.
Mandatory requirements for an internal solution
At the beginning of all considerations, of course, there is the question of whether all the resources for an internal solution are available at all. Payroll accounting requires significant expertise. Even compliance with all legal regulations usually overwhelms the layman. If there are also collective bargaining regulations of one or even more applicable collective agreements, no one can do without expert knowledge. Because not only the statements, but also the registrations and deregistrations with the social insurance companies must be completed on time, seamless vacation and sick leave replacement must also be ensured. There are now some powerful payroll software solutions that speed up workflows but still require skilled employees. A human resources department must therefore have a minimum size that allows for reciprocal substitution arrangements. For medium-sized companies that are too small, the associated overhead in administration is simply too great.
Cost advantages of payroll outsourcing
Outsourcing always has particularly high cost advantages when, alternatively, internal resources would even have to be kept redundant because the processes must be available at all times – this applies to payroll accounting. Disproportionate cost advantages are to be expected if the personnel effort is particularly high. Some indicators of this are
- Frequently changing staff
- Employees with varying working hours and wages
- Applicable special provisions from collective agreements
- Documentation obligations of the Minimum Wage Act
- Any garnishment orders for individual employee salaries
- Employees with foreign residence (cross-border commuters)
Well planned is half the battle!
Basically, there is a lot to be said for small and medium-sized companies opting for payroll outsourcing . And basically, the companies know this, because the pro arguments are very similar to those that speak for outsourcing IT services, for example. Nevertheless, many companies consider outsourcing payroll accounting to be too great a risk. A major reason for this is that the legal responsibility for correct payroll accounting always remains with the company and there is therefore a fear of being held liable for possible errors by third parties. Strict adherence to the payment deadlines for wages and salaries is also a matter for the boss in every well-run company. It simply must not happen that employees have to wait for their money. Both are good reasons – but neither speaks against payroll outsourcing, but for it! Here, too, a specialized service provider can ensure compliance with laws and deadlines better than the typical medium-sized company could with on-board resources. However, this requires careful planning so that the external service provider really has all the necessary data available from the start. In addition, of course, the choice of the right service provider and the drafting of the contract are crucial. Although the legal responsibility always remains with the client, the outsourcing partner can very well be held liable for the economic consequences of possible errors. Of course, every provider will ensure compliance with laws and deadlines. The wheat is separated from the chaff when it comes to underpinning this assurance with appropriate liability regulations and agreed contractual penalties!
Do you still do your payroll yourself? Have you already thought about payroll outsourcing? We look forward to your comments.
Image source: Fotolia.com, Photographer: Marco2811
