All About Payroll: Get to Know Various Payroll Outsourcing Services for Your Business
● Why outsourcing payroll is an ideal option for your lean and agile organization ● Understanding what is payroll and who handle payroll in your business ● Get to know the differences between payroll agencies, accounting firms, and EOR services
Time is essential when running a business. For startups and SME business owners, running payroll can be considered time-consuming and tedious work. Not to mention sorting global payroll. Running payroll is also prone to errors that can be very costly to fix. Especially with the ever-changing legislation, it makes it even more challenging to keep up to date for the personnel who are responsible to do the payroll.
It is not uncommon for many businesses to resort to third-party services to provide them with the extra hand to handle payroll. However, there are numerous outsourcing services related to payroll that offer other human resource management services payroll. To name a few, in this article we will be comparing an accounting firm, payroll agency, and Employer of Record (EOR).
Before we dive deeper into which outsourcing service provider best suits your payroll needs, we need to understand what payroll is and what each outsourcing provider offers.
What is Payroll?
An employee’s financial record includes salaries, wages, bonuses, withholding taxes, deductions, collecting employees’ working hours in timesheet data, and adjusting it when necessary to calculate gross wages and manage employee tax filing information. The duty that entails taking care of payroll is an assortment of tasks, focusing on salary functions of accounting. As such also include calculating and distributing paychecks to employees promptly.
Who takes care of payroll?
Occasionally, an enterprise will have its own accountant or payroll officer. The employees who handle payroll compute the work times, wages, commissions of employees, and social contribution packages including insurance and pension plan. Process paperwork for new employees is by filling out payroll forms (I-9 and W-4 for employees; W-9 for contractors) for new hires and editing existing workers in the payroll system. While processing the payroll paperwork, it is also important to maintain the payroll documentation, ensure the accuracy of all information, and adhere to government regulations and guidelines.
However, once a company has reached a certain size, some business functions such as HR and payroll must work separately, yet continuously provide mutual support to one another. In some organizations, accounting and payroll are completely separate departments. Accounting and payroll serve businesses at different stages of the financial circle. However, both serve within the same financial cycle.
Naturally, payroll lies across both HR and finance. Although HR and finance have distinct roles in an organization, their roles are imperative for the company’s growth. Thus, the integration of both departments must be solid and robust to ensure all salary and data details are secure and readily available when needed.
In short, an employer’s payroll is number-driven and error-prone. Therefore, often the job can be time-consuming, requires expertise in tax laws and accounting, and is at the whim of constant legislative changes. Additionally, payroll is among the most expensive expenses for most companies, and failing to comply with tax regulations can result in penalties and other risks. For those reasons, business owners prefer to hire payroll service providers, which are a payroll agency, accounting firm, and EOR.
Agency is considered a group of agents. An individual agent represents their organization to serve the client’s company. Their range of work includes all the responsibilities that a payroll clerk has to do. Some payroll agencies also include hiring and HR consulting in their services.
Although payroll agencies in the United States can help you take care of employees’ payroll in multiple states, you will need a registered business entity to hire a payroll agency service. Therefore, payroll agencies with more services should not be mistaken for Employer of Record (EOR), because EOR companies’ responsibilities are much more complex than payroll agencies.
In large companies with in-house accountants, each accountant specializes in a particular financial function, among those functions is payroll. While in small companies, in-house accountants are in charge of the entire recording, processing, and reporting of financial transactions to make sure that all transactions are accurate and legal.
On the other hand, an accounting firm is a third-party organization that specializes in diverse areas of accounting, such as business startups, liquidations, and auditing. They maintain accounting records and assist with various accounting procedures, financial statements, tax balance, and annual reports according as you require. Keeping you informed of your business’s overall financial health, and evaluating financial decisions regarding company growth, is yet another crucial service that an accounting firm offers.
Employer of Record
Although payroll agencies and accounting firms can support your business to handle the payroll side, it is a must that the employees are registered within your company. This might limit your hiring capability especially when you are hiring overseas talent where your business entity is not yet registered.
The Employer of Record (EOR) general tasks are hiring, compliance with government laws, and paying employees on behalf of their client company. One of the strengths of EOR service is international transfer. EOR will take care of your overseas employee’s salary/wage in their local currency. With EOR service specialties, it can put those who are employing overseas talent at ease. Slasify provides cross-border salary payment services in more than 150 countries around the world.
Read more to about Employer of Record: EOR vs. PEO: Identify the most suitable HR outsourcing for your company
Although payroll agencies, accounting firms, and EOR can help you handle your payroll needs, those can’t simply be utilized interchangeably. Understanding the context of the business activity and the payroll purpose is a must before selecting either one of those services. In the upcoming article, we will lay out the basic guidelines for you to identify the suitable payroll outsourcing service for your current payroll needs.
Slasify is designed for remote worker. We provide payroll calculation, social security payment and tax filing in more than 150 countries around the world, allowing business owners/talents to seamlessly connect with the world. We have practical experience in serving the world’s top 100 companies. If you have relevant needs, please feel free to contact us.
In addition, if you are a “remote worker” or are on the way to becoming a “remote worker”, and if you want to know more about it, you are welcome to visit Slasify’s website. If you have any questions, you are welcome to write an email to us!
Make working great again #workinglifebalance