Contractor Management — 9 min
Global Payroll — 7 min
If you don’t have a reliable payroll, you don’t have a team. No amount of vision or commitment on the part of leadership can make up for late or incorrect payments made to employees. Make the same mistake with contractors, and word will eventually get out that your business is an unreliable client.
Your payroll process should be one of your priorities, even before you hire your first worker. As you scale, you must ensure that your payroll solutions not only keep up with your business but allow you to anticipate future needs.
Managing payroll well can be challenging, though, even for experienced professionals. Add in remote work and a global team, and payroll evolves from complex to nightmarish.
How do you know when to invest more resources into in-house payroll and when to outsource payroll instead?
Each choice has advantages and disadvantages. Consider your situation carefully before making a commitment to one over the other.
With outsourced payroll, you pay a fee to a third-party provider who handles some of your HR duties. If you decide to keep your payroll operations in-house, you save some money, but you also become responsible for the upkeep of the process.
Payroll functions are not limited to payments made.
Processing payroll involves a wide range of considerations, including the following:
Documenting and updating each employee’s tax status appropriately to ensure they are taxed within the appropriate bracket.
Determining the correct amount of payroll tax for each employee.
Handling garnishments (including wages, salaries, commissions, bonuses, and other income) if authorities demand them.
Keeping up with legal documentation, such as employees’ personal information, W-4s, W-2s, and employment eligibility forms, for reporting, oversight, and auditing.
Maintaining the integrity and safety of your workers’ sensitive information through robust storage and security systems.
Ensuring full compliance with local tax, employment, and labor laws in each country of business.
Classifying employees and independent contractors appropriately to avoid costly penalties, fines, and other consequences.
Let’s shift to key considerations to make as you narrow down whether to run payroll within your small business or through a third party.
Running your payroll gives you complete control of your processes. You oversee and manage each aspect, from protecting personal employee information to sending out paychecks.
Confidential employee data may be more secure, as it’s not exposed to more communications and management through a third party.
However, running payroll efficiently and compliantly requires considerable expertise. Founders with extensive leadership experience or HR backgrounds may feel confident handling payroll processes independently. Without this experience, most small business leaders either bring in an HR pro or outsource, which won’t necessarily be cost-effective in the long run.
No matter who handles payroll, it takes time and effort to properly complete it. Your business also runs the risk of noncompliance if you’re not familiar with the laws of each country you hire in.
Outsourced payroll costs more than the in-house alternative, but the advantages often outweigh the drawbacks for smaller businesses.
Payroll outsourcing services provide the peace of mind of working with an expert. Top integrated payroll services can guarantee compliance with local laws and avoid costly payroll errors and penalties.
Qualified payroll services also help ensure that your employees’ payments go through on time and in full.
If you aren’t sure whether your internal controls are sufficient, outsourced payroll can provide additional security for your team. You may also want to speak with support staff before you sign up to see what kind of customer service you and your workers will receive.
While your business saves valuable time by outsourcing payroll, you do relinquish control of your processes. Resolving payroll issues may take longer since you’re working with a third party.
Adding a payroll partner means releasing your employees’ data to a third party, so evaluate potential partners carefully before signing up.
Only you know your specific situation, so only you can say whether in-house or opting for a payroll outsourcing company is right for your business.
To get started, consider whether you fall into these common categories:
This is perhaps the simplest situation and one of the most common for businesses with only a few employees.
If you have a small team made up of only full-time employees, you may not need much help to process payroll. As long as you feel confident that you have filed your paperwork correctly and you know how to withhold and submit payroll taxes, in-house payroll will probably work for you.
However, if your business operates in more than one country, then you need to be aware of and compliant with each country’s individual tax, labor, and employment laws to avoid payroll mistakes.
Things get a little trickier when contractors enter the picture.
Legally, you must exercise caution to ensure you do not accidentally put restrictions on your contractors that would cause them to meet the definition of an employee. Setting specific work hours, for example, may entitle contractors to certain protections.
As long as you understand how to manage contractors, you can still keep payroll in-house. Just make sure you pay those invoices accurately and on time.
While it’s true that most large companies keep their payroll in-house, small businesses with lots of contractor partnerships are a special case.
Contractor invoices can get complicated quickly, making it difficult to track how much you owe to whom. When contractor payroll changes dramatically from one month to the next — a guarantee with contractors — small business payroll outsourcing may be the wiser choice.
To hire workers in another country as full-time employees, not only do you need an outsourced payroll service provider, but you also need an employer of record or EOR.
A business cannot legally hire an employee in another country unless that business owns and operates a local legal entity in the country where the employee lives. An EOR specializing in small business services (like Remote) can help you employ and pay international workers in full compliance with local labor laws.
Sometimes, small businesses hire international workers as contractors to avoid the headaches that come with formal international employment.
That strategy comes with its own dangers of misclassification, though. If you hire one or two international contractors, you may get away with keeping payroll in-house if your contractors bill you on a third-party platform like PayPal.
Without an outsourced payroll provider, you must remain vigilant to avoid unintentionally breaking labor laws where your contractors live.
Outsourcing to a payroll company comes with several questions, so don’t take the decision lightly.
Think about your capabilities and the key features required as you look at provider options. What kinds of benefits can you offer on your own? Could outsourced payroll allow you to expand the support you offer your team? Would you benefit from the expertise of an international payroll provider as you expand your operations?
Whichever path you choose, keep the needs of your workers top of mind.
Deciding whether to keep payroll in-house or outsource it to a third party is essential for small business owners.
Unless you hire an HR professional who is well-versed in running payroll, why run the risk of noncompliance?
Remote’s payroll outsourcing platform allows you to seamlessly hire, manage, and pay your employees and independent contractors, no matter where they work. It ensures your business remains fully compliant with local tax laws so that you can focus on hiring and keeping top talent.
Contact Remote to get started with their global HR solution for small businesses today.
Reduce costs, manage taxes, administer benefits, and stay globally compliant when you consolidate payroll with Remote.
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Contractor Management — 9 min
Global Payroll — 4 min
Global HR — 9 min
Global HR — 4 min