Chapter
7

Payroll processing: in-house or outsourced?

3
min read

Payroll processing: in-house or outsourced?

Now, for your most anticipated question! Which one should you choose - keep your payroll in-house or outsource it? The debate has been livelier than ever. It’s an important question in the minds of thousands of business owners.

Generally speaking, in-house processing gives you hands-on access to every aspect but it requires more expertise, resources, and technological involvement. Outsourcing your HR is on the opposite end of the spectrum - the staff, resource and technology requirements are diminished and you leave the complexities of payroll processing, like source deductions, to experts that specialize in the subject matter.

Let’s look at the two options to help you get a sense of the best fit for your business.

In-house

If you choose to process payroll in-house, your team will need to manage the entire process from data entry and calculations to funding and remittance. While this can be burdensome, as you need to allocate staff and resources to this, you end up having more control over the process and the ability to access or change the data when necessary. It’s better suited for large companies that can afford to have employees or departments dedicated to handling this.

Before you choose to go with an in-house system, think about:

  • Company resources: Do you have the proper technology, trained staff and resources to maintain records?
  • Data Security: There is a plethora of sensitive data surrounding payroll. Do you have the proper security measures in place to keep the information safe from cyber-attacks?
  • Record Storage: Are you able to properly organize and store all of your business’s payroll record information?
  • Tax compliance: Do you have the capability to understand the complexities of payroll tax laws? Miscalculations and errors can lead to stiff penalties.¹

Outsourced

Outsourcing your payroll operations to an HR firm can be a dependable alternative. It particularly makes sense for small businesses as it allows owners to focus better on their core business, get access to specialized software, and reduce security risk. It’s important to have confidence in your payroll service provider to take the entire process off your desk so that you’re never worried about your employees getting paid late or paying penalties.

Mistakes and delayed payments can result in costly penalties and interest payments. Choosing to outsource payroll processing will mitigate the chances of paying severe fines. Penalties are assessed for:

  • Inaccurate calculation or deduction
  • Late or non-payment (remittance)
  • Late filing return
  • Wrong method of filing information return
  • Wrong method of payment

For detailed information, see the CRA website’s full breakdown of penalties, interest and other consequences.

¹ https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/corporations/corporation-payments/avoiding-penalties.html