The Benefits of Payrolling: A Flexible Solution for Managing Talent in Uncertain Times

At our partner company, we’re finding that companies are always looking for more flexible and cost-effective solutions to manage their workforce. One solution we provide is “payrolling.” Payrolling is a workforce strategy where a company identifies and selects its candidate for a role but outsources the administrative tasks of onboarding, payroll, benefits, and compliance to a third-party agency. 

Unlike traditional temporary staffing, where an agency recruits and hires the candidate, payrolling allows companies to find and vet their candidates while taking advantage of the administrative support and flexibility of a staffing agency. In payrolling, the worker is legally employed by the agency. The worker operates for the client (hirer), but the payroll company is the legal employer, leading to all kinds of benefits for the company and the worker.

Benefits of Payrolling Employees

1. Cost Savings: One of the main advantages of payrolling is the reduction in costs. With traditional staffing, agencies charge a markup that includes the cost of recruiting and screening candidates. In payrolling, since the company provides the candidate, the markup is typically lower, leading to significant cost savings.
2. Flexibility in Hiring: Payrolling provides flexibility during uncertain times, such as hiring freezes or when a company is limiting headcount. It allows businesses to hire new talent without officially increasing their headcount or committing to long-term employment contracts. This can be especially useful for projects that require specialized skills or temporary roles.
3. Streamlined Evaluation Periods: Companies often use payrolling to hire candidates for an initial evaluation period. This trial phase allows the company to assess the candidate’s performance and fit before committing to a permanent hire. If the candidate doesn’t meet expectations, they can be easily offboarded through the third party, avoiding the complexities of terminating a direct employee.
4. Compliance and Risk Management: Managing employment compliance, especially across different states or countries, can be complex and costly. Payrolling providers handle payroll taxes, workers’ compensation, unemployment insurance, and other regulatory requirements, reducing the company’s non-compliance risk.
5. Reduced Administrative Burden: By outsourcing payroll administration, companies free up internal HR resources to focus on more strategic initiatives. The third-party agency handles timekeeping, payroll processing, benefits administration, and other HR tasks.
6. Speed to hire: Having a third party handle the payrolling process equates to less onboarding time to set up the employee’s payroll profile, workers compensation, and benefit choices, all of which can lead to delays in starting work.

When and Why a Company Might Use Payrolling

There are several situations where payrolling can be an ideal solution:

1. During a Hiring Freeze: When companies are under a hiring freeze but still need to bring in new talent for critical roles or projects, payrolling provides a workaround. It allows the company to bring on new staff without technically adding to their employee headcount, thus adhering to internal policies.
2. For Project-Based or Seasonal Work: Companies that need to ramp up their workforce temporarily—such as for a specific project or during peak seasons—can benefit from payrolling. It allows them to quickly onboard skilled workers without the long-term commitment and administrative burden of full-time employment.
3. When Testing a New Role or Department: Payrolling is an excellent option when a company wants to test a new role or department without immediately committing to a full-time hire. This approach allows them to evaluate the need and impact of the position before deciding on a permanent employee.
4. For Interim or Temporary Roles: Payrolling can be particularly useful for filling interim roles, such as during an executive transition or maternity leave. It ensures continuity of work without a long-term commitment.
5. To Reduce Liability and Administrative Workload: Small to mid-sized companies, or those with lean HR teams, often use payrolling to reduce liability and minimize the workload associated with managing payroll, taxes, and benefits. The third-party provider assumes the role of the employer of record, handling all employment-related compliance and administration.

How to Get Started with Payrolling

If your company is considering payrolling, here are some steps to get started:

• Identify a Reputable Payrolling Partner. Choose a third-party agency with experience in your industry and a solid track record of compliance and customer service. (Like us!!)
• Define Your Needs. Clarify which roles or projects you want to use payrolling for and establish clear criteria for selecting candidates.
• Understand the Costs. While payrolling typically costs less than traditional staffing, it’s important to understand the fees and services the payrolling agency provides.
• Ensure Clear Communication. Establish clear communication with your payrolling partner to ensure they understand your company’s culture, needs, and expectations.
• Choose Your Benefits Package. A payrolling agency can work with the employer to curate and offer a unique benefit package specific to attracting and retaining new staff members.

Payrolling is a powerful tool for companies looking to manage their workforce more flexibly and cost-effectively. It offers significant benefits, from cost savings to reduced administrative burdens, while providing the flexibility to navigate challenging hiring environments. By understanding when and why to use payrolling, companies can make strategic decisions that support their growth and operational goals, even in uncertain times.

Learn more about Payrolling with our Partner Company, Semper Group!