Payroll Outsourcing Service

The business world nowadays is highly complex but at the same time, connected. In such a state of system, management of the payroll system of any business can be very significant as far as the success of the business is concerned. The payroll of any business is a representation of crucial viewpoint of that business, as well as a chief expense that is incurred by a number of businesses (Bragg, 2011). If the payroll is managed well, chances are that the concerned business's finances will be well balanced, as well as business will be in a position to adhere to any regulations set. Ultimately, the company will benefit from the advantages of strategic planning, including considerations of how it will achieve its set goals along with keeping all costs controlled.

For a business to achieve its set objective, managing any anticipated business risks and costs is inevitable. The investment in terms of time and money is a requirement for any business's success added to the costs assigned to wages and salaries. Therefore, much effort and resources are needed for ensuring that the payroll is planned, processed and delivered as expected. Usually, payroll refers to the process of paying benefits, salaries, wages, allowances, as well as any other money allocated to employees of any organization. Even though the target of any payroll in an organization is to ensure that all payments are clear, different companies may have different payroll systems. There are those that prefer having their own, while others employ a contracted payroll. Many enterprises find payroll services very attractive especially if compared to internal payroll system (Bragg, 2011). If the outsourced services are chosen correctly, one will find that such services are cheap and simple when it comes to employee payment, taxes filing along with taking care of other costs.

However, the choice of the payroll to use depends on the scale of the organizations as well as their interests. For instance, managers may opt for internal payroll since they may find it cost effective or perhaps, protective in terms of wage information or maybe, they need to ensure control on data concerning their payroll. On the other hand, according to Wood and Howe, such a system may not be as efficient when assessed from the perspective of time spent or scale of operations. A firm that has insignificant changes in its tax obligations can conveniently make use of internal payroll system especially when the needs are straightforward.

Prior to making any decision in the payroll to be used, it is necessary for the management to assess all the risks and cost involved with the change. A company may consider replacing its internal system of payroll with an outsourced one for a number of reasons. Research has shown that even though most businesses prefer processing their paychecks internally, they have noticed that such a system is not as cost effective as they had thought. Internal payroll process necessitates the acquisition of computer, as well as manual accounting program to run the system. Added to the extensive training that is needed, it is evident that the internal system might be very expensive especially for a firm whose tax requirements, deadlines and personnel data change often (Wood, Brown, & Howe, n.d.).

There are a number of cost reductions as well as enhancements in terms of revenue that a given group experiences when it decides to replace its internally run payroll system to adopt a payroll outsourcing service. To begin with, such a firm is likely that it will experience a positive change in terms of employee productivity. The increase can be attributed to the fact that the employees become extremely focused on other areas of their work that can lead to an increase in productivity. For example, such a situation is possible for individuals operating on a small scale and having a headcount of employees running from ten to twenty. Secondly, a change of the payroll system can help a company in doing away with IRS penalties. Usually when companies give the wrong data, certain penalty is imposed. For example, in average forty of every hundred small businesses pay a fee amounting to US$845.00 every year because of either incorrect or late payments and filings. For this reason, therefore, companies and businesses may enjoy penalty-free deals if they adopt an outsourced payroll (Wood, Brown & Howe, n.d.).

In addition, a reduction on the costs incurred during given transactions is a direct revenue enhancements witnessed since the firms responsible for the outsourcing may adopt and offer an online avenue for claim of statement reimbursement and payment related services. However, the organization may enjoy indirect revenue enhancements in terms of brand building particularly in different regions. Brand building is possible especially in a case where the outsourced company uses the partnering company's Logo Branding in pages that are accessed by employees and clients. Best use of technology is yet another indirect cost reduction in this scenario. Use of the best technology is highly felt by small scale operating firms that lack the ability to incorporate the required versions of software related o payroll in their daily operations.

Risks Assessment

Just like any other procedure, changing the payroll system is likely to be accompanied by a number of risks. The risks are eminent because of the substantial sums of money that a payroll accounts for having always exuded issues of fraud and theft. The major risk associated with a change in payroll is handling. Such a case is possible for a payroll system that is managed on a contract basis especially when including third party. The integrity and secrecy of such a system are highly questionable which brings in the risk tampering with the payroll data for the benefit on a certain party. However, assessing apayroll for purposes of identifying the risks that might be involved is likely to point out to the following:

  • A case where employees receive payments that are not their own through fraudulent claim of compensation for days that they had not worked or even being paid for undeserved allowances.
  • Employee's creation of public officials who do not exist with the intent to directing payments to themselves.
  • A case where the manager gives out a roster that is bias in terms of shifts allocation
  • Money is getting into the hands of the employee through direct stealing from the payroll.
  • Disclosure of personal details along with other related bank details, an act that may lead to bribery.

In addition, change of payroll may also face resistance risk. In particular, employees may resist the anticipated development and consequently, much capital and resources are incurred in the implementation process.

The management can deal with the aforementioned and other risks associated with payroll system change in a number of ways. First of all, there is a need to carry out delegations that are appropriate when dealing with changes to the payroll system. The management team can deal with fraudulent risks by making sure that the payroll system has access controls. For example, the system can include passwords along with step by step procedures of verification and authorization. In addition, the management team segregates functions that make sure that the payroll system is controlled by a number of persons to avoid issues of bribery, collusion and corruption-related actions.

A change of internal payroll system of any company to adopt outsourced solution will undoubtedly elicit different reactions from the employees. Some of the employees are likely to positively accept the change while others will strongly offer resistance. Employees will show different types of behaviors resulting from such a change. Problems related to fear, anger, enthusiasm, as well as, ambivalence are likely to be present. For this reason, it is up to the management to be ready to deal with employees' response to payroll change (Mullins, 2005). Of importance to note here is the fact that, it is a human nature to resist any form of change. Therefore, the only way to deal with employee resistance to change is by first understanding that a resistance is inevitable. Secondly, the management should identify the sources of the resistance along with its cause. This way, the team, will be in a position to modify any necessary efforts towards dealing with the anticipated change. Therefore, the management can mitigate employee resistance to adopting an outsourced payroll system by ensuring that: they communicate openly about the anticipated change to its employees, create an avenue where all the affected people can share knowledge and give opinions about the two systems of payroll. Lastly, the management ought to design flexibility and offer the benefits of the outsourced system over the internal payroll. As such, all employees can assimilate the necessary efforts to rhyme with the changes.

Gantt Chart

A Gantt chart that is commonly used for outsourcing an organization's payroll system refers to a graphical representation of tasks along with the duration for which they were done (Kumar, 2005). The success of this system depends on the tasks composed- identification of the project, the resources that are needed as well as a milestone. However, this system has advantages and disadvantages. For instance, when compared to other means of payroll representation, the graphical view of the Gantt chart plays a significant role. The graphical view is very simple and clear to understand. Any person can clearly make a follow-up of the entries concerning a set project. With this system, the management team can identify the set milestones, allocated time and resources as well as ways of achieving the goals.

However, the chart is disadvantageous in the sense that it is based on inflexibility. It is likely that changes are bound to occur within the implementation process since the projects are dynamic. In addition, the relation to task dependencies is yet another disadvantage of the Gantt chart, as opposed to using performance evaluation and review technique (PERT) and critical method (CRM).


Bragg, S. (2011). The new CFO financial leadership manual (1st ed.). Hoboken, N.J.: Wiley.

Kumar, P. (2005). Effective use of Gantt chart for managing large scale projects. Cost Engineering, 47(7), 14--21.

Mullins, L. (2005). Management and organizational behavior (1st ed.). Harlow, England: Prentice Hall/Financial Times.

Wood, J., Brown, W., & Howe, H. (n.d.). IT auditing and application controls for small and mid-sized enterprises (1st ed.). Wiley.

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