The most common misunderstandings about payroll services cleared up
Payroll services providers are companies that support or completely take over all aspects of payroll on behalf of another company. In the USA, the outsourcing of payroll services is widespread. In contrast, only around 20% of companies in Europe, and particularly in Germany, use payroll services. The reason for this may lie in numerous misunderstandings about these services, which often lead to uncertainties and false assumptions. In this article, we clarify the most common myths and misconceptions about payroll services.
Find out how you as a start-up or SME can make this process efficient and smooth:
1. Payroll services are only for large companies
It is a common myth that payroll services are only useful for large companies. In fact, small and medium-sized enterprises (SMEs) and start-ups also benefit from outsourcing payroll services. By using professional services, they save time and resources that they can better invest in their core business.
Benefits for SMEs and start-ups
Payroll outsourcing can help save valuable resources that you can use more efficiently for strategic tasks to achieve your growth targets. Payroll in Germany is a complex process that should be carried out by regularly trained professionals in order to meet all legal requirements while ensuring a high level of employee satisfaction. A payroll service provider can take over the preparation of payroll accounting, reporting to social security institutions and the tax office, as well as communicating with employees to clarify open questions, concerns and problems.
Companies with high growth rates are faced with the challenge of finding sufficiently qualified personnel for payroll accounting, sometimes in a very short space of time. German legislation provides for sanctions and fines for employers if wages, salaries and social security contributions are not paid on time or official notifications are not made on time. Payroll service providers offer a clear advantage here in terms of scalability. At FPA, we are used to delivering payroll outsourcing in a short space of time. For example, we implemented a payroll outsourcing project for our client manaTec within 14 days. In addition, the flexibility of our services means that we can guarantee the consistent quality of our payroll services as our clients’ workforces grow.
2. Payroll services are expensive
Many entrepreneurs fear that payroll services are associated with high costs. In reality, the cost of outsourcing payroll can often be lower than the internal costs incurred by personnel, software and training.
Economic considerations
Internal payroll can incur hidden costs for software licenses, training and HR administration that often exceed the costs of an external service provider. Payroll service providers usually bring a high level of expertise that internal departments struggle to build up. The risk of costly errors can often be significantly minimized by outsourcing payroll.
In addition, many payroll service providers offer pricing models that allow companies to only pay for the services they actually need. For example, FPA offers fixed price models for both payroll accounting and payroll accounting, which are based on a predefined scope of services and the number of employees to be accounted for. Discounts for high payroll volumes are also common practice and contribute to flexible cost control.
3. control over payroll accounting is lost
Another common misconception is that companies lose control of their payroll when they outsource it. Good payroll services like ours offer complete transparency and regular reports so that you as a company can keep track at all times. In this way, you can ensure that all payrolls are prepared correctly and on time.
We always recommend defining in advance exactly who communicates what, when and to whom in order to establish a consistent expectation for reporting, but also for employee communication. If you as a company have specific requirements, you should communicate these clearly to us so that your individual needs can be taken into account at all times.
To keep an eye on important KPIs of your HR process, such as employee satisfaction and turnover, while monitoring the quality of your payroll service provider, we recommend that our clients conduct regular employee surveys, provide anonymous feedback options and create and measure metrics to monitor quality. These metrics can include payment timeliness, error rates and employee evaluations. By combining these methods, organizations can develop a comprehensive understanding of how payroll services impact employee satisfaction and make adjustments to improve them where necessary.
4. Data protection is not ensured
As the processing of personnel data is subject to strict data protection regulations, concerns about data protection when outsourcing payroll are understandable. However, payroll service providers are subject to the same regulations and reputable service providers use state-of-the-art technologies to protect their customers’ data in the best possible way. Data encryption, the use of certified tools and regular security checks should be a matter of course for every provider to ensure that data protection measures are sufficiently effective.
5. Payroll services are only for payroll accounting
A common misconception is that payroll services only include the preparation of payroll. In fact, many providers offer a variety of services. In addition to the preparation of monthly gross/net payroll statements, FPA also offers the management of your payroll accounts, the submission of statutory reports, e.g. to the artists’ social security fund, the severely disabled persons’ levy, statistical reports and remuneration reports to the tax authorities. The preparation of employment certificates and the processing of company pension schemes are just as much a part of our tasks as travel expense accounting. We also support our clients in setting up modern accounting structures, whether with DATEV, Odoo or other accounting software.
The path to successful collaboration
Contrary to many misconceptions, outsourcing payroll to a payroll outsourcing provider can bring numerous advantages, especially for SMEs and start-ups.
It is therefore worth analyzing the individual options and price models together with our FPA team in order to make an informed decision for a collaboration. Because a successful payroll outsourcing partnership, such as the one we have with Hitachi, begins with a thorough analysis of your specific needs. Take the time to define your needs and ask questions. A competent provider will not only offer you the right solutions, but will also proactively respond to changes in the legal framework that could affect your payroll. Through regular meetings and feedback sessions, you can continuously ensure and adjust the quality of services.
Our conclusion
Overall, it shows that outsourcing payroll is not only a relief for companies, but can also offer a strategic advantage in an increasingly complex business world. If you would like to find out more about the possibilities of outsourcing your payroll to FPA, contact us today. We look forward to helping you streamline your payroll processes.