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3 signs that your growing business may be ready to outsource payroll

Posted by: The ADP Team on 22 May 2017 in Payroll

At last count, there were about 2.17 million actively trading businesses across Australia striving to turn their idea into a multi-million dollar success. Technology can provide a helping hand to this competitive struggle, with the decision to outsource payroll a critical step for many growing businesses who need an operational advantage. Here are the top three signs that your business is ready to explore the benefits of outsourcing:

  1. Your limited staff need to focus on more strategic activities

Most employees working at growing businesses have a long list of tasks but have limited spare time. This makes it very easy for the ‘noisiest’, most immediate tasks to take your focus, leaving behind activities that are of strategic benefit. For example, payroll processing is often time-consuming and the demands only increase as your business grows. There’s also no option to not meet payroll deadlines as this affects many aspects of your business from employee morale to financial stability. Therefore your team may be forced to postpone other activities such as supporting a new marketing campaign or employee development program – while they complete one of their many routine payroll processing tasks. This can impact business success. Put simply, an hour spent on internal process is an hour lost to efforts that lead to revenue generation.

Outsourcing enables you to simply remove the burden from your team, helping them improve their productivity in other areas that contribute to increasing business performance. In fact, payroll outsourcing can give you access to cutting edge enterprise-level solutions. For example, you can access software solutions that help you better control time sheet fraud, rostering and leave management.

Additionally, businesses with smaller numbers of employees can find that important knowledge about accounts or payroll is held by just one or two employees, creating a situation where fraud is may be more easily perpetrated.  If you outsource payroll you segregate functions and enable additional checks to reduce your risk. Further, outsourcing ensures that established processes will not be disrupted just because the employee in charge leaves your organisation.

  1. You need to complete work outside your expertise

When critical work falls outside your expertise, you may want to carefully consider whether outsourcing it would help reduce risk. In the case of payroll, Australian workplace and taxation laws are some of the hardest in the world to navigate, according to research commissioned by the Association of Chartered Certified Accountants. An update to legislative requirement such as new recording keeping requirements can easily turn into a mammoth task for your team and leave them struggling to make the change and ensure compliance for every single one of your employees by the due date.

If your team lacks experience in payroll, outsourcing is one way to add much needed expertise on your team. With an estimated 70% of operating costs coming from salaries, overtime and other compensation – any payroll error could be a significant risk to your profitability and growth.  The 2017 Payroll Benchmarking Report from the Australian Payroll Association estimates that Australian businesses are correcting an average of $3,950,000 of payroll errors annually. Recent Fair Work Ombudsman decisions have also taken the step of penalising individual business directors for non-compliance. The recent ‘Hanaichi Japanese Fine Food’ decision resulted in penalties of $20,000 for the director/part-owner.

A breach also has another painful cost: significant reputational damage. The 24-hour news cycle and social media is ready to put any business that breaks the law under the spotlight. Every last detail can be picked up and shared across the world within seconds.

The decision to outsource payroll may help your business stay compliant with any industry, federal and state regulations, reducing the cost and risk of penalties.

  1. Your business needs capital for growth

If your business doesn’t have the adequate internal resources to stay competitive or needs to reduce its fixed costs, including the salaries of full-time employees, outsourcing could be the solution. Outsourcing converts fixed costs into variable costs and can help you reduce capital expenditure (capex). For example, purchasing new payroll software can increase your capex at a time when you need capital to execute growth plans.

If you outsource payroll it could also give you access to economies of scale and cost savings from more efficient processes. Over a period of time many businesses adopt processes of their own, sometimes to meet a temporary need or to suit a particular manager but these can become entrenched and remain even when they no longer serve a purpose. Someone external, such as an outsourcer, can often identify these bottlenecks quickly and recommend changes, based on their knowledge working with organisations similar to yours.

Finally outsourcing may also lower your labour cost as it gives you access to many different experts, with the flexibility to pay only for the support you need.

Outsourcing can level the playing field for growing businesses, giving them access to the same efficiency, insight, risk avoidance and economies that larger companies enjoy. By taking the time to understand when to outsource, businesses can lessen the demands on key decision makers and allow more time for revenue generating initiatives which improves overall business outcomes.

You can access more resources on this topic and learn how a decision to outsource payroll solution can help your business:

  • increase profitability
  • reduce risk
  • boost growth
  • support your people
  • become more competitive

Please note, comments in this story are of a general nature only and may not take your business’ specific needs or circumstances into consideration. You should seek professional advice about your personal circumstances.

Written by: Connect@ADP Team


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TAGS: ATO capex Compliance Fair Work opex Outsource Payroll payroll software Productivity risk rostering and leave management small business time capture