3 disadvantages of outsourced payroll


Let’s start with the big problem first. By handing over your payroll services and control to an outsourced provider, you hand over critical information that can destroy your business.

Imagine if you will what would happen to your organization or business with a contractor doing your payroll this week.

Answer these questions below and see how many you would confidently answer yes to:

  • You know all the legal payment rates, allowances and awards for all your employees.
  • You understand your superannuation obligations
  • You easily understand how to calculate or check your pay as you go tax payments for each employee
  • You would detect if payments went to a fake or non-existent employee

This is where the biggest disadvantage of payroll outsourcing comes to a head. You still need to know what is needed to be entered in the payroll system, you need to know how many employees are to be paid and how much, and whether the payroll contractor is actually making your tax payments as required.

Your employees will still blame you

When payday comes and goes, your employees will not care about who does the payroll outsourcing. When employees are not paid they will come to you for a solution. This means you will have to chase the service provider and hope they can explain the situation and fix it quickly so that your business can get back to work.

It is not a rare event, but payroll contractors have been known to make payments to themselves or clean out your bank completely without you knowing for days.

The management of payroll services can be worse than doing it

Before you outsource your payroll services I want you to think about a few facts first. You will need to have all the payroll information ready to hand over to the contractor anyway. Then you will need to explain any organizational documents, time sheets or employment contracts before they get started. On top of this you will need to spend extra time checking their work to ensure that it is being done correctly.

I would suggest that you give them a sample set of time sheets and get them to demonstrate that they are capable of managing the payroll before letting them loose in your systems. This will also require that you update your insurances to cover any problems that might arise from using payroll services and stoppage of employees’ wages.

Remember that they will have all your employees’ personal records and taxation information that needs to be protected under the Privacy Act, and they have not given permission for you to hand it over to a contracted payroll provider.

To conclude:

It becomes easier to hire your own payroll employee and keep control over the work. The focus is on continuous improvement of business systems to stimulate growth through our principles of Initiate, Inspire, Innovate. Customer-centric focus using payroll service Australia extensive experience in consumer behavior and business process operations to find ways to help business owners manage their organizations.