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Outsourcing vs In-House Payroll: Which is Better?

To cut down on costs, many small businesses choose to handle payroll in-house. But what happens when payroll gets to be too much to handle? Employees may receive inaccurate paychecks or paperwork, and taxes may become increasingly difficult to navigate.

If your business is facing these struggles, it might be time to hand the job over to an expert. But does that expert come from inside or outside of your organization?

With two options on the table—hiring an in-house payroll professional or partnering with a payroll outsourcing firm—you have a crucial decision to make. Here’s what you should know as you weigh the decision.

Analyzing In-House Payroll

Setting up an in-house payroll department has a few key advantages and disadvantages for your business. Of course, it’s also worth noting that the benefits may vary: the outcomes depend on the size and structure of your business, as well as the amount of time and effort you invest in the process.

Advantages of In-House Payroll

Perhaps you have an existing employee that is able to accurately manage the payroll process, or you have the budget to add a dedicated member to the team.

With in-house payroll, you’ll have total control over the process. This means that you, or a member of your team, will have oversight over every procedure and software tool in use.

In addition, in-house payroll services are often ideal for companies that are extremely concerned with data security, as they eliminate the need to store data with a third party.

Disadvantages of In-House Payroll

Those looking to work with an in-house professional will have to prepare for the expenses that come with hiring, onboarding, and compensating an expert to do the job. You may even need to repeat these costs if the employee leaves or is fired.

Smaller organizations often attempt to utilize basic tools to run their payroll in-house, which can often be an ideal solution if their process is not too complex. However, a great deal of risks can come to those entrusting inexperienced employees to manage a robust payroll process.

Understanding how to navigate time tracking, benefits, scheduling, and other issues can be a nightmare for the inexperienced. In addition, you may face costly fines or inaccurately collecting and recording tax-related information and/or not adhering to employment law. Employees may also take action if their paychecks are continuously late or inaccurate.

Analyzing Payroll Outsourcing

When you outsource payroll to a third-party, it can help automate your system in several ways. Here are the pros and cons to look for.

Advantages of Outsourcing Payroll

By working with a human resources outsourcing (HRO) organization, like SynchronyHR, to outsource payroll, your business gains access to both payroll and HR professionals who can help you avoid those payroll tax, employment law, and HR issues. This includes navigating withholdings, unemployment, social security, medicare, tax liens, and child support garnishments that might come up during the payroll process.

Unlike in-house payroll, setting up outsourced payroll is a breeze. Payroll services use expert processes to deliver paychecks in an accurate and timely manner—an absolute must for any company. You and your team won't even need to be involved in the process either, saving you time.

Disadvantages of Outsourcing Payroll

Some businesses struggle with the lack of complete control that comes with outsourcing payroll, which means that forwarding this function to a third party is out of the question.

For example, if a problem were to come up, the business might not want to wait for their vendor partner to respond and would rather circumvent the issue on their own. Or perhaps the vendor is struggling to collect and input employee and wage data, something that is easily accessible to the business.

Choosing the Right Option for Your Payroll Needs

Both in-house and outsourced payroll services serve an essential purpose, but it’s important to consider the needs of your business when deciding which is right for you.

If you’d like to learn more about outsourcing payroll, SynchronyHR is here to help. Our services allow you to reduce labor costs while benefiting from the experience of our team of payroll experts. Learn more about what we can do for you.


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