Benefits of Outsourcing Payroll for Start-Ups

Outsourcing payroll benefits

Start-up entrepreneurs have plenty of things to worry about, but payroll doesn’t have to be one of them. Learn how outsourcing payroll can benefit your business…

Creating and growing a start-up is an undeniably exciting process, but also demands a huge amount of hard work. Between the all-nighters and administrative acrobatics, in those early days, it can be difficult to focus on providing the core services you promised – any number of issues can trip-up hopeful entrepreneurs before they’ve had a chance to really find their feet.

With this in mind, it’s well worth considering areas of your start-up operation which could be outsourced. As the backbone of your business, payroll is a particularly obvious candidate: the process is time-intensive, highly specialised, and often dauntingly complicated. While there’s no one-size-fits-all answer to the question “should I outsource?”, it’s helpful to consider the potential benefits of engaging a third-party…


For start-ups, time is a particularly important resource. Even software-assisted payroll processing still requires patience and diligence – which means setting time aside to take care of it. Many start-ups won’t have time to both run payroll and maintain singular focus on core business needs – but even those that do may find that time ballooning if a mistake is made, or an unexpected problem (like a software crash) encountered.

Outsourcing removes that immediate time squeeze almost completely. Depending on the level of integration your outsource package involves, your payroll and core business processes can take place simultaneously – eliminating high-pressure scrambles as payday approaches.


Don’t underestimate the complex compliance issues – including tax and legal regulation – that go hand-in-hand with the payroll process. To deliver pay accurately, every month, your payroll administrators need to know what they are doing and be ready to adapt to the inevitable problems of even the most routine payroll process.

By engaging a third-party payroll organisation, you are purchasing pre-packaged expertise and experience – not just in achieving compliance, but in taking advantage of new software platforms and administrative advantages which may make the process cheaper for you. If you’re operating in an unfamiliar international location, for example, a third-party organisation can deliver regional expertise on relevant laws and tax regulations – and make sure your workforce gets paid accurately.


The cost of outsourcing should be weighed against the potential time-drain resulting from handling payroll internally. Your payroll duties may be hampering your ability to generate greater profits – thanks to the sheer volume of resources and employee hours the process redirects and consumes every month.

Outsourcing payroll costs may be varied, but they also come with a degree of flexibility: your package can be tailored to your specific business needs, or even scaled up and down depending on your time and financial resources.


By necessity, payroll administration involves handling large amounts of sensitive and strictly-controlled client data, including addresses, salary information, and bank account numbers. Obviously, any kind of security leak is serious in business, but for a start-up the reputational damage is magnified: shaking trust inside and outside your organisation at exactly the moment when attention should be on the benefits of using your services or products.

Outsourcing payroll is a trade-off: you’ll be placing data in the hands of a third party but will be able to select one with a proven security record – and one which can accommodate your needs. In the event of a breach, your outsource company should have a response plan – and will be able to act quickly to address the problem.


The single most daunting aspect of payroll administration is also the reason it’s so important: administrative complexity. From observing legal statutes to making the correct tax and social security contributions, achieving a good standard of compliance isn’t easy – which is why skilled payroll staff are in such high demand.

As a start-up taking its first steps, this is exactly the area in which internal payroll can become an administrative and financial burden: compliance penalties can involve large fines – and terminally slow down your ability to deliver your core services. Payroll outsourcing isn’t just a way to import the expertise necessary to navigate the compliance labyrinth (and reduce the risk of financial penalty), it also offers peace of mind, to employees and clients that your operation is a strong, safe bet.


From time-tracking to tax calculation, modern payroll relies heavily on a range of software platforms – that not only make administrators’ jobs easier but increase the overall speed and efficiency of the process. While your start-up may not have a huge volume of payroll to work through each pay cycle, software tools can help immensely with ‘small detail’ issues such as tax calculation and compliance.

Remember: payroll technology evolves rapidly, and keeping up with and understanding the latest platforms is part and parcel of a good payroll administrator’s job. Hiring a dedicated outsource organisation is a way of keeping up with the advantages the latest payroll technology offers, including innovative new software platforms, digital tax initiatives, and cloud computing flexibility.

Now is your turn 😉 What do you think about outsourcing payroll?
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Graham McKechnie
Graham McKechnie
Global Tax Director at

Graham McKechnie has over twenty-five years of global mobility experience and heads up activpayroll’s Global Mobility Division. He is a qualified tax professional and a member of the Association of Tax Technicians (ATT).


  1. Outsourcing is becoming more important, and more importantly, easier for businesses to take advantage of. There are so many companies available now that will find a complete virtual team for you, making the transition to using outsourced staff relatively pain free and simple.

    Thank you for sharing.

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