What are your risks associated with outsourcing payroll? What are your advantages and disadvantages of outsourcing payroll services over in-house? SingaporeAccounting.com would advise business owners to consider outsourcing payroll risks and benefits before any commitment. IRAS (Inland Revenue Authority of Singapore) require that all your tax reporting be exact. Business owners have to do their due diligence with the accounting and payroll records. This can be a very heavy burden. The amount of paperwork alone requires many hours or work. The fact that you cannot afford to make a mistake makes it even more frightening.
Many small business owners buy a computer program, which supposedly makes the job easy. However, research has shown that several of them that still find themselves not knowing what they are doing despite the benefits of third party payroll. Some hire an in-house employee to do the job. This too can be costly. We would strongly advise business owners to outsource to a professional from the list of payroll providers even if it is not from SingaporeAccounting.com.
You can have your payroll done by your accountant or by a payroll service for a very nominal fee. You will pay your employees and report the wages paid to your payroll service. They will work with you, take the responsibility for collecting the proper information from you on wages paid, and see that all of the required reports are prepared and filed in a timely manner.
One of the major problems that you, as a small business owner, must deal with is that of determining the status of people and companies that you hire to provide specific services for your company. Are they independent contractors, non-employees or are they employees of your company? Is he or she signing contract for service or is it a contract of service?
- A contract for service is an agreement or engagement between you as the hirer and the self-employed vendor or other companies’ contractor to perform a job or project at an agreed cost.
- A contract of service is an employment agreement between you as the employer and employees where he or she will work for you as your staff members, entitled to company’s benefits with cpf and monthly pay.
- If the service providers are independent contractors, they are not eligible for unemployment, disability or workers’ compensation benefits. Also, you as the hiring firm do not have to pay employee-employer taxes or provide worker’s compensation insurance, and you are usually not liable for the contractor’s actions.
- If the service provider is, in fact, an employee of your company, rather than an independent contractor, the opposite is true. They are eligible for unemployment, disability and workers’ compensation benefits and you, as the hiring firm, must pay employee-employer taxes, provide workers’ compensation insurance, and be liable for the contractor’s actions.
Outsourcing Payroll Advantages
Statistics has shown that outsourcing payroll gave small business owners more time to develop their business and concentrate on the selling. By not having to spend any time in payroll preparation, business owners will even be able to participate more in their family activities.
Due to late or incorrect tax filings, a lot of small business incur losses for paying the fines. Most payroll service providers will take responsibility in ensuring your business not to get penalized for late submission.
Avoid Technologies Unfamiliarity
Sometimes, even if you have done your due diligence to ensure early filing, but due to sudden updates in the software you using, data might not get synchronised resulting in error updating the tables. Outsourced payroll functions help reduces unexpected technical events from occurring.
Avoid Re-Training or Hiring New Bookkeeper
Most MNC or big business will want to hire in-house bookkeeper for the payroll process. However, if the employed bookkeeper decided to change environment one day, company will have to re-train or hire someone new. This is a pain to many business owners. They are required to spend time to train or get the new employee to be familiar with the process and yet have to worry about he or she quitting the job after the training.
Outsourcing Payroll Disadvantages
Leak of Confidential Information
As company’s important biodata and confidential information will be shared to the payroll outsourcing firm, someone whom you don’t know, extra care and evaluation is necessary to ensure your data will be protected. Business owners have to do their own due diligence in the service provider is reliable and trustworthy. This can be the main drawbacks with outsourcing payroll.
Paying Extra for Services
Depending on which packages you have signed up for, some payroll outsourcing companies include services that business might not actually require. You may be able to cut down on the cost with advice from the experts in understanding your business and customise the outsourced functions based on your actual requirements.