Don’t Hire a Payroll Officer Just Yet — Outsourcing Could Be the Better Fit for Your Business

Starting a business brings both excitement and high hopes. During the first few months, everything seems manageable. You’re hands-on with all the ins and outs—from brand development, sales and marketing, and even human resource management—until you feel completely overwhelmed and realize that you need like-minded and equally responsible individuals to manage the less critical aspects of the operations. 

Payroll management, for instance, may not be as critical as other core aspects of your business, but if handled manually, it demands a lot of time and poses a significant burden. Inaccurate or late payroll can damage the morale and productivity of your employees. Similarly, non-compliance with tax and labor regulations can lead to serious penalties. With these, many businesses rush to hire in-house payroll officers when, in fact, there are other options that might be more practical—and one is payroll outsourcing. 

This blog explores why outsourcing payroll management can be a smarter and more flexible solution than hiring a full-time in-house payroll officer. Read on and feel free to share your thoughts in the comments.  

Costs of Hiring an In-House Payroll Officer

While cost is the biggest concern for most business owners, let’s start with a breakdown of the real expenses associated with hiring an in-house payroll officer: 

1. Salary and Benefits

As of the first quarter of this year, the average basic salary of a payroll officer in the Philippines is PHP 22,742, according to Indeed. However, this can reach between PHP 30,000 and PHP 40,000 if you prefer one who has years of experience in the field. On top of the salary, you will also need to pay for the employer shares in the statutory contributions, 13th month pay, and other standard company benefits. 

2. Recruitment, Onboarding, and Training

Hiring the right person takes time and money. Whether you will work with an agency for swift and streamlined recruitment or manage the whole process internally, you will incur costs for job ads, HR time, and onboarding. If you hire a less experienced candidate, expect additional investment in training to bring the employee up to speed. 

3. Hardware, Software, and Other Licenses

You are onboarding a new company employee, so expect that you will need an additional workspace, new computer equipment, office supplies, additional software, and other licenses. Your new payroll officer may also need specialized payroll software to run payroll, and you might end up paying big for a premium license that will be used by just one person. 

4. Employee Turnover

Payroll is such a high-stress, high-responsibility role that there is also a risk for a high employee turnover. While you may have invested company resources for hiring and training your new payroll officer, you may not have the assurance that the employee will stay in the company for at least a year. If that is the case, then expect a cycle of recruitment, onboarding, and training — which means company resources going down the drain.

5. Inevitable Disruptions

When payroll is managed by one person, that employee’s absence—whether due to sick leave, vacation, or unexpected resignation—can disrupt payroll operations. In such cases, you may be forced to hire a temporary replacement or reassign the work to other staff. Other companies even consider hiring a backup payroll officer, which doubles the cost for a role that could be streamlined.  

6. Non-Compliance Penalties

Noncompliance with labor and statutory regulations or missing filing deadlines often results in fines and penalties, and if any of these happens, the liability falls on the company, not the payroll officer. Hiring someone with strong expertise and up-to-date knowledge of regulations is critical, but such professionals come at a premium and can still be hard to find.     

Key Benefits of Outsourcing Payroll

Yes, hiring an in-house payroll officer can be costly, and it might not be the best option for your business right now. That said, let’s look at the other side of the coin—and find out what payroll outsourcing has to offer: 

1. You Don’t Need to Hire an In-House Payroll Officer.

You don’t need to hire another salaried employee, allocate extra office space, invest in additional equipment, or consume more company resources just to manage in-house payroll operations. By outsourcing, you gain access to a team of experts without the overhead costs that come with maintaining an internal payroll department.

2. You Don’t Need to Purchase and Maintain Payroll Software.

You won’t need to worry about payroll software—that responsibility falls to the payroll service provider. Additionally, you’ll avoid the extra costs and setup associated with other tools typically required for an in-house hire, such as productivity software, email accounts, and other essential platforms.

3. You Can Take Advantage of an Expert and Professional Team.

Outsourcing payroll places the responsibility in the hands of seasoned professionals who specialize in every aspect of payroll—from accurate salary and deduction calculations to staying compliant with the latest tax laws and regulations. This significantly reduces the risk of errors, with the provider accountable for accuracy and compliance.

4. You Can Ensure Tax and Statutory Compliance. 

Payroll processing also involves compliance with the Bureau of Internal Revenue (BIR) for tax deductions, as well as contributions to statutory agencies such as SSS, PhilHealth, and the Pag-IBIG Fund. By outsourcing payroll, you eliminate the burden of meeting deadlines, handling filings, and processing benefit claims. 

5. Your Sensitive Data Stay Secure and Properly Backed Up. 

Outsourcing payroll typically involves formal contracts that define how company data are handled—ensuring they’re shared only between the two parties and kept strictly confidential. Additionally, there’s no need for your business to invest heavily in advanced cybersecurity systems, as data protection and security measures are usually managed by the payroll service provider.

6. You Can Always Scale Up or Down Your Payroll Operations.  

Outsourced payroll services offer flexibility during financial or staffing changes. There’s no need to cut HR staff, drop payroll software, or rehire later. Your payroll operations stay consistent and adaptable as your business evolves.

7. You Can Focus on the Core Business Activities.

By outsourcing all payroll-related tasks, you and your company can gain the advantage of redirecting valuable time and resources toward core business initiatives—such as developing strategies that drive growth and boost profitability.