Maintaining payroll records of your employees is one of the legal requirements for companies in India. Most companies have used the manual process of managing payrolls by hand in the past. Not only is this time-consuming, but it can result in penalties and fines in case of any mistake. Therefore, many companies now prefer to turn their payroll services over to professionals who are more skilled at this task.
A less costly option is to buy payroll management software for the same that can be used by a trained employee.
If you are a web development agency and are choosing between payroll outsourcing services and payroll software, then this article is for you.
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Payroll services or do-it-yourself software?
Deciding between handing your payroll services over to a professional firm or doing it yourself with payroll software basically boils down to the following criterion on which you must test your requirements.
- Cost.
- Employee training.
- Data access.
- Data security.
- Integration.
Let’s explore each of these in turn.
1. Cost
If you’re a small company like a new web development or design firm then, cost could be a major factor to decide if you should go for payroll management services or software.
Both options have their costs.
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Payroll management services
The cost of payroll services depends on several factors such as:
- Location. Payroll and payroll taxes are subject to local laws. Depending on the complexities of laws in your state, the cost of outsourcing may vary.
- Employees. The cost is generally based on the number of employees you have.
- Services. The cost also depends on the bouquet of services required. You can opt for the basic service of generating payslips based on attendance or you can outsource the entire HR (human resource) function.
- Tax requirement. Although tax filing is part of the basic package of most providers, some may ask for additional fees for the year-end tax compilations.
- Industry. Industries with complex compliance requirements (like mining) may be charged higher payroll management fees.
You'll want to ask any service provider you're considering to give you a cost estimate.
Payroll management software
With the software, there are two options:
Either you can buy the complete software and install it internally or you can subscribe to the cloud-hosted/SaaS-based solutions. Cloud-hosted solutions are in demand because:
- There is no hardware or infrastructure requirement
- You need not have a team of IT professionals to keep these systems running
Plus the software will cost you less than the outsourcing service alternative.
So, if you’re a small web design company with just a few employees, then instead of outsourcing or buying the complete software package, you can simply subscribe to the cloud-based solution.
2. Employee training
Of course, external payroll management services have a recurring cost (monthly or yearly). But the software alternative also includes the cost of hiring and training employees to use the software.
If you have trained employees who know how to manage payroll, it will be comparatively easy for them to understand the software.
Training staff on the payroll nitty-gritty like managing working hours, tax deductions, benefit deductions, etc, as well as the software itself, is a tough choice. In such a scenario payroll outsourcing services might be a better option.
3. Data access
Many times the historical data for an employee is needed for managerial decisions and internal processes. In such a situation, extracting information from your service provider may take time and effort.
On the contrary, data files can easily be exported from the payroll software and the required information can be accessed without any hassle or time delay.
A note about the cloud
With cloud-based software, you can access your data from anywhere in the world where there is an internet connection. Since the application and data are hosted in the cloud, you can access the given URL with your credentials from anywhere.
As there is no hardware requirement, you can use the cloud app from either PC, smartphone or tablet wherever there is internet.
Multiple people can also work on the same set of data while working from different office locations or geographies.
4. Data security
With great power comes great responsibility.
Although cloud-based payroll software empowers employees, having so much sensitive data on the internet can be a risk. The same is true for payroll outsourcing services.
Payroll data is extremely sensitive and includes employee details such as Aadhaar card numbers and other crucial information.
Considering this, you must evaluate the security safeguards provided by any cloud-hosted software as well as that of external service providers. You must also warn users on use of such systems on public Wi-Fi.
The most secure option? Desktop-based payroll software that resides on one computer that one or two people have permission to use. Certain cloud-based solutions are also secure from cyberattack through their multi-level firewalls and encryption systems.
5. Integration
Source: ProfitBooks
While evaluating between the option of software or outsourcing, you must consider whether it works with any other software you’re already using for functions like HR and accounting.
Some payroll management software comes as a standalone solution with an integrated HR application.
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Final words
In this article, we discussed the various factors that you must consider while choosing between outsourcing payroll services or buying the software.
Outsourcing is a costly affair but it’s a hassle-free solution, with no headaches of training the staff and looking for mistakes.
Software, on the other hand, is less expensive and allows a lot of internal control of the data. On the other hand, this option requires employee training and is still prone to mistakes.
When it comes to evaluating both the options and choosing one for your company, it finally boils down to your preferences and priorities. Weigh your choices and make the one that seems best for you.
