Payroll can be daunting for some, specifically for startups as well as small business owners. In fact, based on a survey, 40% of the business owners feel taxes and bookkeeping are the worst parts of owning a business. There are different rules and regulations for full-timers, consultants, annual or quarterly tan cycles, and so on. So, the small business owners either choose to outsource payroll to a vendor or do the entire thing by themselves.
Business owners also fear payroll because of different myths associated with it. However, the reality of these myths may be entirely different. So, let us learn about the truth of those myths.
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#1 Payroll is time-consuming
Well, this myth is not entirely a myth. If you choose to perform payroll on your own as a business owner, maintaining attendance sheet, analyzing the performance of an employee, and tracking their bonuses, commissions, and compensation can be time-consuming. But if you outsource payroll or use a payroll automation tool, you will save time significantly.
#2 Payroll is complicated
Each business uses a different way of processing payroll. A business may manually manage it or use payroll software. In both cases, attendance and time, compliance, onboarding, benefits tracking, are completely left out or locked away in different systems.
But, with payroll vendors, a business can integrate everything into one platform. This decreases the number of systems, time consumed, and errors committed in the traditional process.
#3 Vendors do not work with the small business
This was true several decades ago. Modern payroll software providers and vendors are ready with significantly scalable solutions. There are able to serve a team of five members as well as an organization of 1000+ employees with the same efficiency and effectiveness.
#4 For compensating employees, you need physical timesheets
Paper timesheets are highly obsolete and only a few legacy businesses use them regularly in the current time. Timesheets are open to fraud, error-prone, and difficult to map. So, digital attendance and time systems help streamline attendance processing, saving a lot of time and errors.
Automated integration of timekeeping with payroll diminishes the error rate by almost 66% as compared to those who rely only on automating payroll.
#5 Payroll is only about giving compensation
Many businesses still feel that payroll is only limited to giving compensation to the employees on time. However, payroll is much more than simply paying your employees. It is about measuring the overtime of your employees, knowing if there is a tax update, keeping a track of their sick leaves and absences, and noting the deductions correctly. This way, you can also measure the performance of an employee and offer promotion or bonus based on this analysis.
#6 You can pay seasonal hires under the table
As a new business owner, you may commit the mistake of not noting seasonal hiring as well as associated payroll processes. These may be non-formalized recruitments, utilizing talent pool within your family or friends. Without proper documentation, you lose out on several benefits of being a business owner. You may also not fulfil the minimum wage limit, which may cause issues in the future.
#7 Handling payroll in-house is cost-effective
Many businesses use this excuse to justify their fear of changing the payroll technique that they have been using for years. It is understandable for a startup or small business owner to be tight on resources.
However, if you miss a tax update or do not pay your employees on time or pay lower than their actual payment due to errors, you may end up losing a lot in terms of money as well as the dedication of the employees towards the organization. Employees tend to be less dedicated and alert in their work if they are not paid on time. As a result, the talented ones may even quit working for your organization. This will cost you more eventually.
#8 Handling payroll in-house is safer
Many organizations feel if they hire third-party services for payroll procedures, the security of the data is compromised. A common fear amongst business is losing the personal details of their employees to hackers or individuals who may use wrongly.
But these options are safer than asking your employees to perform the payroll process. This employee may reveal sensitive information within the company, which may hurt the sentiments of an employee. If you use trustworthy payroll software or outsource the service to a legitimate third party, your sensitive information is safer.
#9 Outsourcing payroll will ultimately result in vendor lock-in
In the first year of business only, its owner will realize that it is taking them 6-12 hours each month to complete payroll. Outsourcing implies investing in the third-party provider and you will have to work with this party for a certain period even if they are not offering good-quality services. However, in the current time, you can work with any vendor for the same without agreeing to any lock-in periods.
You must have heard about these payroll myths as a business owner several times, which may influence and confuse your approach to the payroll process. Now that you know the reality, manage your payroll process even more efficiently either by considering the services offered by a service provider, choosing payroll software, or going for in-house help.
Lingappa is the General Manager of Payroll Operations at Paybooks. He has worked in the payroll industry for 13 years gaining unparalleled experience in managing payroll, payroll outsourcing and payroll implementation.