Risk factors associated with In-house Payroll Processing

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There are not enough hours in the day to successfully manage every aspect of a business personally. Payroll is one of them. Balancing all the internal operations of a business can be tricky, especially when it comes to payroll. Payroll processing managing in-house in an organization is a time-consuming process. Keeping track of payroll deductions, expenses, new recruitments and terminations, attendance management as well as post payroll activities, filing, handling the documents can be frustrating tasks. The increasing payroll duties often lead business owners to seek other alternatives, like outsourcing.

However, there are many aspects of business which can’t be outsourced but, payroll is a department which needs expertise and an organization needs hands which are filled with experience and expertise. The payroll department in HR has lot of firefighting at times which can be only handled by a payroll expert. Rather than recruiting a bunch of people to handle payroll who will be occupied by multiple tasks in a day and who might or might not give your payroll activities the attention which is must, handing over the payroll to an external expert is surely a good idea and adopted by many.

A recent survey found that 40% of the small businesses ended up paying penalties due to human errors and delays and later decided to shift to the outsourcing partners for their payroll activities in the year 2019.

Risk factors associated with in-house payroll processing :

  • Payroll Duties Are Complex
    Payroll is complicated. Aside from actually paying the remuneration to the employees, there’s much, much more prior to that and which goes on behind the scenes. Typically, when payroll is processed lot of complex data is gathered to run the payroll. This is why payroll activities are majorly divided into three phased; pre-payroll, actual payroll and post payroll activities. Each activity has its significant role in running payroll.
  • In house Payroll Is Prone to Mistakes
    In India, compliances, laws and regulations play a crucial role when you run a business. A small error may lead to penalties and punishments. Tax laws and regulations change frequently, and many small business owners simply don’t have the time to keep up.
  • Lack of Security
    This is probably one of the biggest problems with in-house payroll systems. They simply do not have the same level of security that an outsourced solution does. Especially if you control the personally identifiable information of of a large number or hundreds of employees in your database. The hackers target small and medium businesses for this reason.
  • lack of Compliance Focus
    Laws that have an impact on the employer/employee relationship seem to change every day. Do you have time to keep up with them?
  • Penalties and errors
    Failures, misconduct or late taxation can be very costly at times in a business. When it comes to law, discipline is must. Payment errors are painful and tracking each small task is a headache.
  • Resource Dependency
    When an employee leaves an organization, he leaves with, learning, tactics and processes which are very crucial for a business and at the same time uncontrollable when there is no assigned back up. Most of the organizations who has inhouse payroll are people dependent but when the payroll is outsourced, you become process oriented, you don’t have to worry about it when you handover the payroll to external experts.

Payroll outsourcing services provide businesses with a worry-free solution regarding their payrolls, and moreover, in many cases, payroll outsourcing service companies can save you a lot of money and maintain your goodwill by avoiding various penalties for violating governmental tax rules and regulations. In addition, such companies are always aware of changes in tax laws and can often offer advice for your business on how to handle different types of taxes.


The way businesses run in this era is very different than the traditional time. Back then, each responsibility used to be on the shoulders of company owners and key team members. But now, time has actually changed for businesses. In an organization there are many departments and sub departments. Hiring professionals externally has become a new trend such as hiring digital marketing agencies for creative stuff, hiring outsourced CFO services providers to handle finances and accounts, hiring commission-based sales people, everything can be handled smoothly and that too in a perfect manner!


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