Everything you need to know about payroll outsourcing

Managing payroll involves more than just paying employees. There’s a lot than needs to be done before the payroll can be processed.

This includes gathering the relevant employee information (and maintaining it to ensure that it is always up to date), calculating salaries and any overtime pay due, managing deductions for medical aid, provident/pension fund and unemployment insurance fund contributions, as well as calculating pay as you earn amounts to be paid over to the South African Revenue Service (SARS). Only when all this is done can salaries be paid and payslips distributed.

Managing payroll is a time-consuming task. According to Technology Advice, 26 per cent of small businesses spend three to five hours a month processing their payroll manually.

Managing payroll is also complicated. This is because there are numerous legal requirements to comply with, which means the risk of making mistakes is high.

Consequently, many companies prefer to outsource the management of their organisation’s payroll to a payroll bureau. This enables them to improve efficiency, reduce operating expenses and alleviate risk, all of which gives them the peace of mind to focus on the core business activities and strategic tasks that are essential for the growth of the business.

What is a payroll bureau?

A payroll bureau is an accounting service provider that provides outsourced payroll services to other businesses.

A payroll bureau acts on behalf of these businesses to SARS, providing the tax collection authority with information it requires, and also receiving and acting on information from SARS relevant to those businesses.

A payroll bureau is also a source of professional expertise for its clients, which means they don’t have to employ their own in-house payroll specialist and can contact the payroll bureau whenever they have a query.

What does a payroll bureau do?

A payroll bureau comprises a dedicated team of payroll consultants and administrators who provide an extensive spectrum of services to businesses that are integral in keeping businesses healthy. These include:

• Generating pay runs (weekly, fortnightly or monthly)
• Calculating benefits and reimbursements
• Making deductions such as medical aid and pension/provident fund contributions
• Ensuring the electronic payment of salaries with accompanying security-sealed payslips
• Producing standard payroll reports
• Processing employee tax certificates
• Supervising statutory submissions
• Submitting annual reconciliations 

Who should use a payroll bureau? 

While any business could potentially employ the services of a payroll bureau, the typical client is a small business – one that is just big enough for its payroll to be be an inconvenience, but also too small to justify managing its payroll in-house.

Why do businesses choose a payroll bureau to manage their payroll?

There are many reasons why businesses prefer to use the services of an outsourced payroll services provider.

Perhaps the biggest reason is that they do not want the bother and inconvenience of payroll. They do not want frustrated employees every time pay day comes around. Instead they want accuracy and reliability, as well as someone to consult with if they have any queries. They also want to avoid incurring severe fines and penalties from SARS owing to non-compliance.

Outsourcing the payroll function to a payroll bureau holds many other advantages. Have a look at  this article about the top reasons to hire a payroll services company.

How to choose a good payroll bureau

With so many outsourced payroll services providers available in the market, how do you go about finding the one that’s right for your business?

While there are several qualities to consider when choosing a payroll services provider, certain attributes should be at the top of your list. Click here to read more about these.

Using the services of a payroll bureau provides businesses with a hassle-free solution regarding the management of their payrolls. Paying employees accurately on time, every time is crucial to the success of any business, regardless of its size.