Three Reasons Businesses Think In-House Payroll is Better than Outsourcing - and Why They're Wrong!

By Zac Ma – Associate Director - SEA , Links International Singapore


Small businesses in Singapore are booming, and many of them are looking for ways to get ahead of the competition. When it comes to payroll, there are a few misconceptions about how to save time, money and, in general, be efficient with limited resources.

Here are the three most common reasons why small businesses in Singapore think in-house payroll is better than payroll outsourcing, but are mistaken:  

1. Controlling Costs

Many small businesses in Singapore assume they will save money by processing their payroll in-house. Their conclusion relies on the assumption that payroll is a task that anyone can learn and execute quickly and simply. This thinking underestimates the expertise necessary to handle the administrative side of payroll processing in-house. 

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As the frequency of a business’ payment disbursements increases, the tedious nature of payroll swells. It requires a dedicated office space, manpower and, ironically, an increase in salaries for the staff members dedicated to handling this back office function.

Employees who handle payroll processing must spend a significant amount of time becoming specialists in benefits, labour and employment laws, and the changing nature of local taxes. Regardless of whether the CEO or an employed accountant processes payroll, when it’s done in-house, it significantly detracts from the company's resources. 

Outsourcing payroll is more efficient not only because it enables small businesses in Singapore to save money, but it saves them the hassle of spending time on activities that do not generate a profit.

2. Business Owners Do Not Trust Outside Contractors 

Small business owners in Singapore work hard every day, and sometimes during the night to build their businesses. This is why most of them hesitate when posed with the dilemma of whether they should outsource their payroll, even when they have no knowledge of how to operate payroll. 

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While it is reasonable to protect valuable assets, it is unreasonable to refrain from outsourcing payroll, especially for small businesses. First, when payroll is done in-house, the risks of fraud increase when an employee has access to the business' finances. When outsourcing, there isn’t a conflict of interest to get in the way of accurate reporting. Further, when payroll is processed in-house, there’s an increased risk that payroll processors will share salary information with employees who otherwise should not know what their coworkers are paid. Finally, when operating payroll in-house, small businesses in Singapore put themselves at risk for hacks unless they shell out funds for expensive spyware software.

3. Integrating Payroll with Other HR Systems

Smart businesses in Singapore want to integrate their payroll with other HR systems, and they assume that, if they outsource, this will not be possible. While this may have been true years ago, technology has changed the landscape. Businesses that outsource their payroll use affordable software that enables them to use payroll data to extrapolate the cost of acquisition of a new client, and a variety of information related to financial aspects of the business. 

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Not only that, but chances are that, if done in-house, unless the business is paying the salary of their own accountant, the data will not be organised efficiently enough to extrapolate for analysis. In other words, a small business that wants to maintain control over payroll processing to merge it with other HR systems is one that is willing to pay top dollar for a payroll processing employee. For any small business looking to save money, simple software will make integration easy and the cost of outsourcing much more affordable than doing it themselves.

Conclusion

Outsourcing payroll is the most effective way for small businesses in Singapore to save money, ensure security, and save time.


Links International is a leading payroll outsourcing provider in Asia and supports 15 countries across Asia-Pacific. If you’re interested to explore the idea of payroll outsourcing, please do not hesitate to contact us.

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Zac Ma

Zac Ma

Regional Sales Director, HRO, SEA at Links International

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