3 Factors for Determining the Best Way to Manage Your Company’s Payroll


Effective payroll management is crucial in any business. Not only do you need to ensure you’re compliant with government standards, but problems with payroll can also have an impact on employee retention and loyalty.

In the age of the Great Resignation, when finding and retaining high-quality talent is harder than ever, you can’t afford to drive employees away with late salaries or inaccurate payslips. If your current strategy isn’t working as well for you as you’d hoped, it might be time to consider a change in tactics.

The question is, how do you choose the right way to manage your payroll? How do you decide whether you should handle payroll in-house with software, or outsource it to a professional? What factors should you look at when examining new tools and services?

Today, we’re going to look at three factors that will help you determine the right way to manage payroll for your organization.

Factor 1: The Size of Your Team and Payroll Complexity

The size of your team and the complexity of your payroll processes will often go hand-in-hand. If you’re managing a relatively small number of professionals, then you may find it’s easier, and more cost-effective, to outsource your processes to an external company like an accounting agency or a payroll bureau.

When your team is small and everyone needs to handle a wide variety of tasks, there’s tremendous value in being exempt from getting bogged down with the ins and outs of payroll. However, outsourcing can also quickly become expensive and complex. Transmitting details back and forth, approving rosters, and contending with someone else’s workflow deadlines all add friction, and when your team reaches a certain critical mass, it can be more efficient to manage payroll internally.

What’s more, today’s creative compensation structures, which are effective tools for attracting top talent, might mean that you’ll end up plugging business performance data into formulas on your own before payroll can be closed. This, in turn, raises questions as to where the tipping point is – if you’re doing a good amount of prep work for payroll, you may be better off managing the entire thing on your own.

If you don’t want to work with an outside vendor, searching for a payroll management solution that simplifies processes for you could be a good alternative. The best software can help you to automate common processes like gathering data, transmitting reports to the government, and wiring salaries, without compromising on compliance.

Of course, as your company grows and you need to keep track of payments for hundreds or even thousands of different employees, things often start to become more complex. Not only do you need to keep track of more data and documents, but you may have different payment policies for various employees. You might even need to follow different compliance guidelines for staff in different regions.

In these cases, your HR and finance teams are likely large enough to handle payroll in-house, especially if you’re using tools that integrate data from third-party sources and streamline workflows.

Factor 2: Your Current Tech Stack

If you’re thinking of outsourcing payroll, you’ll need to ensure the companies you work with can leverage data and tools from your existing technology stack effectively.

If you’re planning on managing payroll in-house, then you’ll need to ensure the solution you select for payroll management allows you to sync data from different platforms and solutions. Handling payroll becomes a lot more complicated when you’re using several pieces of disconnected technology.

With this in mind, examine your current software and strategy. If you’re already using accounting software, payment platforms, tools offered by pension providers, and an HRIS, then make sure your payroll software can integrate with all of the solutions in your stack. Search for options with easy-to-use data pushes, so you can maintain a comprehensive view of your entire financial ecosystem.

Looking at your current software can also help you to determine what kind of features you’re going to need from a payroll solution. For instance, do you need a tool that provides access to multi-user approval flows, so your entire business leadership team can get involved? Do you need to prioritize detailed audit trails and custom data export options for compliance purposes?

Payroll software solutions can come in a variety of different forms to suit specific business needs. Assess your options carefully, and ask yourself which tools will give you a combination of the best possible ease of use and the most efficient payroll processes.

Factor 3: Your Needs for Support and Guidance

Finally, the process you choose for managing payroll will often depend heavily on how much support you’re going to need. If you already have expertise available in-house, you might be able to handle everything on your own with basic payroll management software.

However, if, like 70% of smaller companies, you don’t have an in-house accountant, bookkeeper, or comprehensive financial team, the chances are you’ll need more support. One option could be to outsource the entire payroll process to another agency, although that route comes with the disadvantages discussed above.

Another option is to consider choosing a payroll software solution that offers access to comprehensive support. Some payroll software vendors provide access to CIPP-accredited experts who can provide guidance and direction when you need it most. They can offer onboarding support to get you started with your new technology, as well as help resources.

The support you get from any vendor can vary from helping you quickly answer payroll queries issued by your employees, to assisting you in navigating complex legislation.

If you want to maintain more control over your payroll strategy in-house, but still need extra support, finding a software provider with the right approach to customer service could be the best strategy for you and your team.

Choosing the Right Payroll Strategy

There’s no one-size-fits-all strategy for effective payroll management. Some companies prefer to handle all of their payroll processes in-house, using dedicated financial experts.

Others outsource their payroll processes to third-party vendors, so team members in the business have more time to focus on other tasks. As we’ve seen, the solution that makes the most sense for your team situation largely depends on the growth trajectory of your workforce, the complexity of your compensation packages, the tech stack that you need to operate with, and the type of guidance you require.