Payroll processing is a mandatory part of doing business, but managing it in-house can drain resources and lead to costly mistakes. In the Philippines, where compliance with BIR, SSS, PhilHealth, and Pag-IBIG regulations can be complex, outsourcing payroll can save significant money. By reducing time, errors, and overhead, payroll services offer tangible financial benefits.
Let’s dive into how your company can save with some example scenarios.
The True Cost of In-House Payroll
In-house payroll involves more than just paying employees. It requires software, trained staff, and time to handle tax computations, government contributions, and compliance. Here’s a breakdown of annual costs:
- Bonuses, Benefits, and Other Costs: A large company often delegates a payroll specialist or HR staff to do manual payroll tasks like timesheet validation, data entry & updates, compliance reporting, and year-end tax forms. With so many employees to do payroll for, this is often a full-time position, meaning you’ll need to pay bonuses, benefits, government contributions, and office space.
Outsourcing payroll is often cheaper than paying the salary of a full-time payroll specialist. Additionally, you won’t need to cover employee bonuses, benefits, government contributions, and office space.
- Software Costs: Once your business reaches 100 employees or more, using specialized payroll software becomes essential. Manual processing through spreadsheets is not only time-consuming (often taking twice as long) but also highly prone to errors. Penalties are charged per mistake (as stipulated in the Labor Code) which is why businesses pay costly subscription fees per year for payroll software. Additionally, you’ll also need someone skilled in using the software to handle payroll tasks accurately.
However, if you outsource your payroll, you won’t need to invest in software or hire an in-house expert. That saves you from having to pay the yearly subscription and train someone to use the software.
- Training: Keeping up with BIR and labor law changes may require 15–20 hours of training annually. Outsourcing payroll takes this off your mind. Our expert accountants and legal team will ensure your compliance is up to date.
- Penalties: Payroll errors are common. A single mistake, like miscalculating SSS contributions, can lead to costly penalties. Thankfully, we have experts who ensure compliance with Philippine regulations, virtually eliminating these risks.
The actual numerical costs vary for every business. For larger companies, costs are typically higher, as they often require more senior in-house staff to manage their complex payroll tasks. In contrast, smaller companies with 20 or fewer employees face lower expenses, as their simpler payroll processes can be handled manually by less experienced staff using spreadsheets, with a manageable risk of costly penalties.
Summary
Let’s review how outsourcing payroll services lowers your costs:
- Bonuses, Benefits, and Other Costs
- Software Costs
- Training
- Penalties
This major cost reduction is great for medium-sized businesses, freeing up funds to help your company grow. Large corporations with bloated in-house accounting teams can save even more by downsizing and relying more on outsourcing. Which benefit fits your business goals best?
Is Outsourcing Payroll Worth It?
For large companies with complex and time-consuming payroll tasks, outsourcing is often more cost-effective than hiring additional staff to manage them in-house.
You can do the math and check how much you’re spending on in-house payroll tasks to see how switching to outsourcing can benefit you. Schedule a consultation with us, and we’ll guide you through the numbers to optimize your payroll process.
Do You Need Assistance?
BusinessRegistrationPhilippines.com offers legal and accounting services to simplify compliance. Outsourcing many of your bookkeeping, auditing, payroll, and other accounting tasks to us is often more cost-effective than expanding your in-house team. Reach out today to schedule an initial consultation with one of our experts.
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