Advantages and Disadvantages of Payroll Outsourcing

advantages and disadvantages of payroll outsourcing

Adapting to the digital era can be daunting for many small businesses. However, it’s commonplace for companies to outsource specific business processes to streamline daily operations, including payroll. But how do you know if outsourcing payroll is the right move for your business?

Luckily the experts at SOURCEitHR are here to help you navigate the advantages and disadvantages of payroll outsourcing.

What is Payroll Outsourcing?

When a business hires an outside company to handle specific aspects of its daily operations, it’s called outsourcing. Payroll companies provide legal, tax, and accounting support to companies to guarantee their employees receive their paychecks on time, with minimal error, and within compliance with local financial rules and regulations. 

Outsourcing your payroll allows your company to focus on other organizational tasks that are important for you to drive productivity and growth. 

Outsourcing payroll allows your company to:

  • Manage and minimize incidents
  • Calculate, pay, and distribute payroll accordingly (i.e., manage direct deposit and frequency of pay)
  • Manage benefits (such as commissions, overtime, vacation time, incentives, retirement plans, and other benefits included in employee compensation
  • Manage timesheets, invoices, and payroll reports
  • Manage benefits enrollment
  • Enter and track employee data
  • And much more

Why Companies Should Outsource Their Payroll?

Regardless of the size, type, location, or industry of your company, every business with an employee can benefit from a comprehensive payroll outsourcing service. Payroll outsourcing is especially beneficial if your business:

  • Does not have an in-house administration team or finance team.
  • Needs the in-house finance team and administration team to focus on non-payroll tasks.
  • Needs resources to manage international finances.
  • Does not have the ability to invest in the latest payroll technology.
  • Is concerned about compliance with current or future regulations.
why companies should outsource their payroll

Pros & Cons of Outsourcing Payroll

Saves time
Payroll is a time-consuming process. By relieving the payroll department of these burdens, these employees can focus on other critical business areas, such as developing financial strategies to strengthen the company’s competitive advantage and drive growth.
Loss of control
Are you worried about losing control of payroll activies? In partnering with a professional payroll company, you save time and resources and gain complete oversight of all of your payroll activity. Through the power of innovative technologies and cloud capabilities, you and your employees can manage their data 24/7 from any location with internet access.
Access to technology
Technology changes frequently. It can prove costly to upgrade to the latest innovative payroll technologies. When you outsource payroll to a reputable and experienced company, you’ll gain access to their technologies. Your company will gain access to all of the latest payroll technologies for a fraction of the cost. 
Confidentiality threats
Some may worry about security and confidentiality threats about outsourcing payroll. However, reputable payroll companies have many layers of security protocols in place to protect all of your data. Additionally, they will sign a nondisclosure agreement to ensure the utmost privacy.
Prevents mistakes
Payroll professionals spend all of their time mastering the various aspects of payroll activities. By hiring professionals whose entire focus and responsibility is payroll, you minimize the chances of errors, missed deadlines, or late payroll tax filings.
Finding the right outsourcing company
One of the biggest challenges to outsourcing payroll is finding a reputable and experienced company to partner with. However, with a bit of research and by seeking references, you can partner with the ideal fit for your company. At SOURCEitHR, we take pride in handling all of our client’s payroll and HR needs.
Guarantees compliance
Payroll providers are trained to understand the latest labor codes and legislations. This knowledge and expertise ensure your organization will remain compliant.
Enhanced offerings
Outsourcing payroll empowers smaller businesses to offer more services to their employees, including direct deposit, retirement contributions, access to benefits management, and much more.
Reduce costs
Calculating payroll can be costly for small businesses. From managing wages and distributing paychecks to creating financial reports, managing benefits, and preparing/paying the payroll taxes, managing payroll in-house is both costly in terms of time and money. Outsourcing payroll can save your business the costs of managing your payroll internally.


Are you tired of spending all of your time, energy, and resources on your payroll? The experts at SOURCEitHR are ready to manage your payroll for a fraction of the cost it takes to manage your payroll department internally. With years of experience and the latest innovative technologies, we take all of the hassles out of payroll so you and your employees can focus on what matters most! 

Our wide range of service offerings and resources empower us to handle your team as it grows and evolves, streamlining your payroll and HR processes today and long into the future. Contact a member of our team to learn more.

karim-mubarak-co-founder-and-managing-partner-at-sourceithr (1)

Karim Mubarak

Co-Founder & Managing Partner

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