7 Common Misconceptions About Payroll

A payroll outsourcing firm takes away the payroll burden from you. They insulate the process with expertise, cut-down costs, and nullify the risk of errors and non-compliance.

You cannot afford to go wrong with payroll. 


For starters, the cost of mismanaged payroll begins with harsh fines and penalties and ultimately leads to ruining the entire business.  

  • As per research payroll problems affect 54% of the workforce.
  • 40% of SME owners believe that managing payroll and related taxes are the worst and most time-consuming part of owning a business.

The issue, however, is not payroll but the misconceptions hovering around it that create problems and harm businesses.

Here are 7 payroll misconceptions and truths behind them

Third Party Payroll Services

Payroll is a one-time effort

This cannot be farther from the truth. Setting up a framework for payroll is a continuous process —  it doesn’t end with setting up payroll software. 

The process needs regular evaluation and periodic updates. And that’s precisely how you maximize its efficiency.

  • You need to continuously eliminate repetitive tasks, find error-prone areas, and identify time-consuming parts using payroll software. 
  • Changes in the work atmosphere, compliance standards, and technological developments also contribute towards making payroll an ongoing process.

Remember to frequently audit your payroll software and the entire process.

Payroll = salary calculation

Payroll is often misconstrued as a process of paying employees for their work jobs. The reality, however, is different. 

  • Payroll cannot exclusively fit under HR. It involves accounting procedures too. 
  • The payroll process involves salary calculation as per the leave policy but that’s just a part of it. It also deals with time and attendance, deducting TDS and contribution for PF, ESI, PT, & all that’s applicable.

Payroll is thus much more than salary calculation.

Anyone from the HR/Finance department can process payroll

Payroll deals with highly confidential employee data so it mustn’t be handled by just about anyone. 

  • Assign payroll responsibly to experts who have the necessary skills. 
  • Make sure they know to handle sensitive information besides knowing about taxations and its statutory aspects. 
  • Always have a confidentiality agreement in place to maintain the security of your payroll data. 

All about tax

  • Taxation is easier to handle in-house.

Companies that outsource the entire payroll process often handle taxation in-house to save costs. However, by not handing over the process to experts, they end up increasing the cost manifold through non-compliance and heavy penalties.

  • Payroll doesn’t involve employee taxes.

This is misleading. Employers must fairly withhold payroll taxes from employee’s gross salaries. The payroll team then —  on behalf of the employees — pays it to the government.

Payroll doesn’t involve strategy

That’s a lie. 

Payroll doesn’t comprise transactions alone. There are various strategic activities that go into making an efficient payroll process. 

  • Payroll components are thoroughly reviewed to ensure that your payroll synchronizes with the industry standards, benefits employees, and gives you a competitive edge.
  • Ensure that your payroll and organizational goals are on the same lines.

Payroll has no role in retaining the employees and enhancing their experience 

Employees have both monetary and non-monetary motivating factors. And both affect their experience. 

An efficient payroll system with accurate payments, payslips issuance, ESS portals increases employee’s trust in the organization. This inculcates a transparent culture, reduces employee turnover, and enhances their experience.

Outsourcing Payroll outsourcing is not worth it

A common misconception is that it is easier and cheaper to handle payroll in-house. 

Reality – Here are the ingredients to handle payroll in-house 

You’ll need 

  • Time and money to upgrade and maintain your payroll software.
  • An in-house IT team.
  • IT Hardware support, time and again. 
  • Extra time and cost to train employees, for payroll administration and taxation, and to keep up with the compliances.
  • High risk of errors and non-compliant procedures.
  • Cost of fines and penalties if you go wrong.

Does it look like it’s easier or cheaper to deal with the aforementioned?

The truth is, a payroll outsourcing firm takes away the payroll burden from you. They insulate the process with expertise, cut-down costs, and nullify the risk of errors and non-compliance. 


Now you know the common misconceptions that trap you and ruin your business. The next step is to understand their corresponding truths and take one step at a time to eliminate them by leveraging the latest processes and technologies.

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