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Ask Alight: Six benefits of keeping payroll in-house

Payroll is an essential function that every business must manage, with no exception. The ultimate decision when it comes to managing payroll processing and administration is whether to outsource payroll operations or keep payroll administration in-house.

This quite literally is a million-dollar question for most large businesses – is outsourcing payroll or keeping (bringing back) payroll processing in-house the right choice for operational resilience, growth, and current budgets?

A lot is said about the advantages of oursourcing, of which there are many, but there are disadvantages too, and it’s recommended before any payroll transformation project is embarked upon to think through the pros and cons of outsourcing payroll services versus managing payroll in-house.

The main difference between in-house and outsourced payroll processing is that an in-house team is on staff and on the payroll, while an outsourced payroll provider is hired externally. The six benefits of keeping payroll in-house are as follows:

1)     Better flexibility for last-minute changes or corrections

In-house payroll offers significant flexibility over most outsourced payroll service options. Changes to payroll at the 11th hour are not uncommon. If the outsourced payroll provider doesn’t have the agility to accommodate these, a supplementary payment run can be required to accommodate changes, at a cost. Alternatively, fees are often charged to modify an existing pay run before it hits the bank.

Bonuses, changes in salary, or deductions can be made quickly and accurately, ensuring employees aren’t under- or overpaid. Furthermore, a cloud payroll system integrated with your HR software is always up to date and accurate as any changes to employee details or new starters can be automatically made.

2)     More control over the end-to-end payroll process

One of the most significant advantages of processing payroll in-house is the level of control over the entire process, from ensuring the security of sensitive employee data to controlling who can see salaries, benefits, and bonuses.

Having payroll onsite reduces the chance of employee and payroll data being compromised. The fewer system and communication lines payroll data is transferred through, the lesser the security risks.

With cloud or on-premise payroll software, department-level security can also be set up, so users can only access specific files without compromising any other data.

3)    Lower total cost of payroll administration

While this is a benefit often presented by payroll outsourcing service providers, maintaining, or bringing payroll in-house can save money depending on its structure. While resources and skills will need to be allocated for training and paying in-house payroll staff, this can be more cost-effective than outsourcing.

4)     Data integration

Having the end-to-end payroll process under one roof simplifies the process of getting data into the system while lowering risks relating to the movement of PII files. In addition, the ability to integrate HR, finance, and payroll data can be hugely valuable to the business. Data analytics for business planning and auditing efficiency is also improved.

Audit trails increase visibility on payroll hours, and any adjustments made. The increased use of electronic clocking in and timesheets can be integrated into the workforce management and payroll processes.

5)     Improved Efficiency

With an in-house payroll operation, complete control is kept over report generation. This allows for pay structures, rates of pay, employee contracts, bonus, or commission plans, etc., to be tailored to the company.

An in-house payroll team can deliver a comprehensive overview of compensation and can help in workforce planning in its reporting. These can be customized precisely to changing business needs.

This benefit ties directly in with the advantage, which is integrative data. Having payroll onsite with integrative features can result in fewer duplicate entries, the ability to automatically report on information, and an overall improvement of data accuracy across the organization.

6)     Greater accuracy

An outsourced payroll provider can only be as good as the information they have on hand. The onus is on the client to consistently supply correct or up-to-date payroll information to the provider.

This means payroll reports need to be generated ahead of each run (more often when there are salary changes, bonuses, new starters, or leavers). The time it takes to build the report with inputs from HR, finance, and payroll, can be counterintuitive.

An integrated in-house HR and payroll system provides a single version of the truth to ensure little to no inaccuracies in pay.

There are multiple payroll platforms and services available, including payroll advisory, deployment, and optimization open to in-house payroll teams to ensure investments in cloud payroll technology are well managed and optimized and continue to provide the accurate, real-time data necessary to make the best financial and human capital decisions for the business.

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