Outsourcing Payroll Can Mean Major Cost Savings

There are any number of reasons why businesses choose to go with outsourcing payroll. Surveys have found one thing - that almost nine out of ten businesses, when they choose to outsource, do it to save on the cost of maintaining an in-house department. While they save considerably on the hassle, that doesn't really figure that high on their list.

So if you are considering outsourcing payroll at your company, chances are, that your company is interested in it for the cost savings, too. But is it possible that those kinds of savings will really not come your way? Are those cost savings real or illusory?

Well, outsourcing payroll, without doubt, can save a business money - up to 20%, by most accounts. But it really depends on the exact circumstances of the company in question. Not every company will stand to save as much.

Let's look at what those circumstances might involve.

The first circumstance to consider is the size of the business. The bigger the business, the more they're going to need to spend on maintaining a payroll department. They are likely to see huge savings in absolute terms. Small businesses are likely to see savings too even if they won't be much. For a small company though, the savings can truly mean a lot more.

Payroll usually falls within the HR department in most businesses. If outsourcing payroll becomes a point to consider, companies should begin to think about outsourcing the entire HR Department. They call it HR BPO, and the savings can be great. When a business decides to go the whole hogand outsources the entire department, they can expect savings of up to the third. That can mean quite a lot in these times of financial difficulty.

Companies might wonder - if they were to run an in-house payroll department, but if theyh equipped it with cloud computing software instead of on-premise software, would the savings achieved make outsourcing payroll unnecessary?

Not exactly. Major studies done on the matter say that while you can save something this way, it's nothing compared to completely outsourcing payroll and everything else.

The reason many businesses fail to consider outsourcing payroll for the cost savings seen therein is that they don't correctly calculate what it's costing them to maintain an in-house department. If theyy would only take everything into account, they would quickly see how spectacular the savings can be.

Basic FAQs In Human Resources Outsourcing

In Western Europe, business process outsourcing is nearly universal. Nearly every company outsources at least something. Outsourcing in  human resources though, isn't that prevalent yet. Seeing as how it is one of the most expensive departments to run in any company though, interest in outsourcing HR should start growing. If your business is interested in this, there is probably some industry body in your country that you can look at. In Britain, the HR Outsourcing Association is the place to head to.

Outsourcing in HR is relatively new, and understandably, everyone has questions about it. Let's take a look.

The main question that anyone's likely to have to do with human resources outsourcing, understandably, is how much money they can save  doing it. Price Waterhouse Cooper, the auditing firm, puts the figure at 33%. That's how much your average company can hope to save by outsourcing the entire department. Even if businesses begin to look into human resources outsourcing for the cost savings potential alone, they do need to look into how it can possibly result in reduced quality of services.

It isn't just that when you outsource something, that the outsourcing service provider may not take enough of an interest in the whole thing or that they may not be equipped to deliver the quality required. It's also that  every company has its own way of running things, and when an outside company comes in and tries to take the whole process off their hands, it can be very difficult for them make sense of what goes where.

Basically these days, outsourcing service providers do not try to look at every client with fresh eyes. They won't try to provide a unique system for them. Instead, they provide a standardized service, and ask each client to rearrange  the HR department in the company according to the model provided by them. This way, one can be sure of an efficient, well-tested model.

Often, businesses stay away from human resources outsourcing for the simple reason that they see a lot of opposition among their ranks. Employees usually don't like the idea that HR should be outsourced. They fear for instance that they won't get the kind of support that they have always depended on.

If there's a mistake with their paycheck for instance, they worry about how they might get it fixed. Basically, it's up to the management at any company to make sure that the rank and file are made to completely understand and accept how these things work well.

And then of course, there's the actual move to outsource. How do you find a good company? Well, Accenture, IBM, Chen tax, HCL – all these major names in outsourcing provide excellent services in general. Basically, you need to look for monthly reporting, flexibility, great communication and so on.

The Benefits of Outsourcing Your Business Functions

Whether you own a small or large business, chances are very good that you can benefit from outsourcing some of your business functions to outside vendors. Ideally, you want to be in a position where you are working on your business, rather than in your business.

Running and operating a business positioned for growth requires many different key functions. For starters, you must handle accounting, administration, customer service, as well as sales and marketing. Many new small business owners attempt to tackle all of these functions on their own, and find that they work long hours and can begin to burn out quickly. By outsourcing some of your routine tasks, you can leverage your time to spend on the functions that you do best in order to grow your business.

When trying to determine whether outsourcing will benefit your company, you need to determine how much money your time is worth. A simple way to figure this out is to estimate how much money you would like to make in a year, and divide that into productive work hours. Most of us are only productive about 2-3 hours a day. For example, if you'd like to make $200,000 this year, and you work 3 productive hours each day, 5 days a week, then your time is worth roughly $260 an hour. With this scenario, you could benefit from outsourcing any function that you can pay someone to do for less than $260 an hour.

In order to outsource effectively, you must understand your own business and processes. Take some time to write down job descriptions for different functions, as well as the processes you use in your business to accomplish certain tasks (like how you enter your invoices and receipts, how you generate new leads and clients, etc.). As part of this exercise, include clear expectations of what you hope to accomplish. A clear vision and business plan is key to setting up clear expectations. Once you have written down the job descriptions, you'll have a better idea of what you would like to outsource first.

There's no hard and fast rule as to which job functions you should outsource first, but many business owners like to hand off the functions that they enjoy the least. If you really dislike customer service, you may want to find a customer service rep first.

You have many options when looking for companies or services that will handle your outsourcing needs. Check with others in your industry to see who they use to outsource their functions. Many outsourcing firms not only specialize in certain functions (like customer service), but also in certain industries (like real estate). You can use freelancers, virtual assistants, or any number of outsourcing firms.

Many business owners hesitate to outsource some of their functions because they want to have complete control over their business, or they believe that it will be too difficult to train someone to do what they need. If you fall into this category, you may want to try outsourcing some very simple, routine tasks to get started. It will be well worth the effort!

When choosing an outsourcing firm, or freelancer, make sure you set clear expectations up front. Share your vision about how you see that function growing your business, and offer incentives for work well done, or work done under budget, or before a deadline.

In addition, take time to properly document how the work should be performed. This can be done easily with screen capture video software, and/or written processes and procedures.

Taking the time to properly train and motivate your outsourced personnel will benefit your business greatly. By now, you will see that outsourcing some of your business functions will help free up your time to work on your business, rather than in your business.