The Advantages of Outsourcing Payroll

In order for a business to operate optimally, an employer has to ensure that multiple departments are functioning effectively. As a business grows, the number of obligations it needs to meet increases in quantity, as well as complexity. One such obligation that could cause considerable consternation is payroll management. A company’s payroll function is something that can become increasingly complicated as more employees are hired. There are multiple tax and labour laws that need to be abided by in order to ensure that an employer always remains compliant with the guidelines set out by the South African Revenue Service (SARS) and the Department of Labour. It is because of this multi-faceted nature of payroll that many companies have opted to outsource this function to a business that specialises therein.


When starting a business, most entrepreneurs are focused on transforming their ideas into a viable business but rarely do they hold an accounting qualification as well. It is because of this that most business owners often do not have the expertise to manage employee payroll efficiently and effectively. This is something that can be extremely time-consuming if one does not specialise in the field. Budgeting what you can afford to pay employees and deciding on a method of payment only skims the surface of the entire payroll function. There are different taxes to consider, namely Pay As You Earn (PAYE), Standard Income Tax on Employees (SITE) and a Skills Development Levy (SDL). There are also a number of labour-related issues to keep in mind, such as overtime, severance and compensation pay, benefits and reimbursements, as well as deductions and contributions for each employee.


Increased Efficiency:

The complexity of the field and the threat of non-compliance has led many companies to explore the advantages of outsourcing their payroll functions. Outsourcing is attractive because it simplifies and streamlines the payroll process for the employer. Entrusting this function to a payroll specialist means that the process is done more efficiently and more accurately, whilst ensuring compliance with all the legal requirements. 


Many accounting firms offer payroll management services and have expertise in the relevant financial and legal frameworks. Because of this, they are able to offer various solutions tailored to the needs of an employer. From meeting the basic conditions of employment to calculating monthly contributions, outsourcing payroll to professionals means that companies remain compliant with SARS and the Department of Labour and through this, provides employers with some peace of mind. 


Reduced Costs:

Companies that offer payroll services are well-versed in every aspect of payroll, therefore it can also prove to be more cost-effective to outsource. Less time is spent on payroll, fewer penalties are incurred, and the cost of research and technology development falls on the outsourced entity, all of which saves the employer money. Setting up a payroll system and ensuring that all the tax and legal requirements are met each month is exceptionally labour intensive, which could end up causing an employer a lot of unnecessary emotional and financial stress.

If the past year has taught us anything, it is that the business world is volatile and prone to changes. A great way to hedge against this type of change is by ensuring that every part of your business is functioning as well as it possibly can. One way to do this is by entrusting your company’s financial obligations to professionals.

At Booysen Accountants, we offer a range of financial management services that aim to meet clients’ needs and exceed expectations.