Payroll Services

Third party payroll

By June 21, 2017

Considering third party payroll? Here’s what you need to know

For businesses that are used to having an in-house payroll model, switching to a third party payroll service can seem like a leap of faith. When really, it’s more a case of minding the gap.

Third party payroll is an increasingly method of payroll delivery for medium sized businesses.

The recent Australian Payroll Association 2017 Payroll Benchmarking Study revealed that the uptake of payroll outsourcing increased from 19.5% to 28% between 2015 and 2017 for businesses with around 200 employees.

While in-house payroll remains the dominant mode of delivery for this category of business, the steady adoption of a third party service should not be ignored. If anything, it warrants further investigation.

Actual cost savings from third party payroll

Tangible cost savings are the main reason that medium sized companies consider payroll outsourcing.

Engaging a third party payroll provider often means that the business is ready to sidestep the need for a full-time employee to manage payroll.

Considering how the average cost of a payroll employee can range from $55 000 to $75 000 annually, companies with 200 employees or less often can’t justify employing a full time payroll officer.

However, it is important to consider the economies of scale. Typically, the cost per payslip decreases as employee numbers increase.

That is why it’s always prudent to have conversations with potential vendors when you’re shopping around for a payroll partner to ensure that this decision makes sense for your business.

The vendor’s ability to manage queries

With a better process of checks and balances, payroll outsourcing mitigates the risk of fraud or non-compliance, while keeping costs low.

Sounds like an ideal arrangement so what could possibly go wrong?

One of the main reasons companies end their outsourcing contracts is a failure of some vendors to address queries from individual employees in a timely fashion.

The result is the business then has to employ an in-house person to manage queries between staff and the third party payroll provider anyway.

At Affinity, we know that questions from employees will inevitably arise, which is why we have a helpdesk team ready to handle all queries. That way, employees who need help with or want to know more about their payslips can contact us directly.

Whichever vendor you select, find out to what lengths they are prepared to support you.

Your Ability to Manage Change

The early days of utilising a third party payroll provider will seem counter intuitive.

Where you used to stroll to the payroll office to sort out a mistake, the same can be accomplished over a simple phone call now.

To ensure that employees are not confused by the switch, change management is crucial to smooth out what could otherwise be a bumpy ride.

The key here is communication. Keep employees informed throughout various stages of the payroll outsourcing project, an educate them in the new courses of action to take in regard to their payroll.

To find out if payroll outsourcing is right for your business, speak with one of our payroll consultants today at 1800 778 326.