Fintech, Digital Payments, and the Risks of Outsourcing Payroll Accounting: The Case of MyPayRollHR

Abstract

Payroll accounting requires specialized knowledge and expertise that many small businesses lack. Employee recruitment, retention and satisfaction are highly dependent on the employer’s ability to efficiently process payroll in a timely and dependable fashion. Firms outsource payroll to devote more time and resources on their primary business and strategic goals which may have a bigger impact than processing payroll does, on the firm’s triple bottom line – people, profit, and the planet. While the decision to outsource payroll can help ensure employees are paid and taxes are withheld in a timely fashion, there are inherent risks in handing off this important function to a third-party processor. The ultimate responsibility for accurate and timely processing of payroll remains with the employer. So, firms seeking to outsource payroll need to perform adequate due diligence to ensure there are proper financial controls at third party payroll processors to prevent fraud and misappropriation. This paper presents a recent real life case study that explains the potential pitfalls of outsourcing the payroll function especially when digital payments are used.