Outsourcing payroll has many obvious benefits such as saving of time and money, timely payment of salary to employees without any errors, time to focus on growing core business, compliance with government laws, and many more. We hear about them all the time.

But other than the often talked about obvious benefits, payroll outsourcing also has many hidden benefits for your business.

1. Less Taxes for Employees

Payroll outsourcing companies can help you in significantly reducing the tax burden of employees by implementation of tax saving policies such as flexible benefits plan. Under flexible benefits plan, employees are given the choice to select pre-defined tax saving salary components as part of their CTC and the employees can claim tax exemption by showing the bills for expenses related to those salary components.

E.g. if an employee has hired a driver and is paying the salary to the driver, the employee can choose to include driver’s salary as part of CTC and can claim tax exemption on the amount paid to the driver. There are many salary components such as books & periodicals, internet fee, etc. that can be a part of flexible benefits plan. And every employee can choose different salary components based on his needs from a list of FBP components declared by the company.  

2. Privacy of Employee’s Salary

If your payroll is managed internally with the help of a payroll software, there is a good chance that the people close to the person managing the payroll might get to know the salary of other employees knowingly or unknowingly. e.g. the person sitting next to the payroll admin might get to see the salary details of other employees when the payroll admin is working on an excel sheet containing the salary of employees. 

But if your payroll is outsourced to a third party, the risk of data breach significantly comes down as it will be extremely hard for anybody to get the salary details of an employee from an external vendor.  

3. Implementation of best practices

The knowledge of your internal payroll team might be limited to few industries, but a payroll outsourcing company might be managing the payroll of thousands of companies from several different industries.  

This gives them immense knowledge of the various practices followed in all these companies to retain and motivate employees, create incentive policies, prepare reports for decision making, etc. and they can help you in implementing all those practices in your company as well.  

Hiring an employee to manage the payroll internally will never give you the kind of strategic advantage that you get when you outsource payroll to a professional agency.          

To sum it up, payroll outsourcing has both obvious and hidden benefits for your business and really frees you up from many mundane tasks that don’t contribute to the direct growth of your business. So, you should definitely consider managed payroll services from a good agency if you are struggling with your payroll.  

If you know other less talked about benefits of outsourcing payroll, please let us know in the comment section below.