If you’ve ever been assigned with the responsibility of managing payroll for some time, you clearly have a picture or understand how time-intensive and involving the work is. That’s the main reason why companies choose to outsource the work to payroll providers so that they can manage their payroll system to run accurately and efficiently. In the long run, it saves your team’s time and resources.
If you don't know how payroll outsourcing works, this guide is perfect for you. It will help you understand clearly how payroll outsourcing operates.
Definition of Payroll Outsourcing
Payroll outsourcing can be defined as the use of a service provider (third party) to handle the compliance and administrative roles of paying employees.
The work of payroll outsourcing companies
A payroll outsourcing agency will process your payroll by collecting your employees’ data (pay rate, job title, and the date of hire) and acquiring any time card data. Then it will calculate the payment that’s due to each worker, and then pay the money by issuing a payroll check or direct deposit.
The following are steps followed by most payroll providers:
• Put up payroll software with your organization and employee data, that is your payroll bank account and workers current accounts to process direct deposit.
• Request for employees time card data (clock-out and clock-in periods).
• Verify hours worked for each pay time as paid or unpaid, then evaluate gross pay.
• Manage your payroll, preparing pre-tax deductions (like taxes and benefits) and post-tax deductions.
• Process deposits to the workers account i.e. pay card, direct deposits.
• Process payments to dealers like the insurance companies, on your behalf.
• Come up with reports to your company.
