Do You Need To Outsource Payroll Service?
Millions of U.S. businesses outsource their payroll processing. Why do they do it, and what benefits does it bring them?
How common is outsourcing payroll? In a recent survey conducted by Robert Half and the Financial Executives Research Foundation1, 39 percent of U.S. companies — more than 10 million businesses — claimed they outsource their payroll processing. And 43 percent outsource their payroll tax responsibilities.
While some businesses opt to handle running payroll functions in-house through manual bookkeeping or do-it-yourself payroll apps, small business owners have increasingly come to prefer the expertise of professional payroll providers.
But why do so many business owners decide to outsource payroll? Here are main reasons:
- Outsourced payroll saves time
If you handle your payroll in-house, you know that it requires a lot of time and attention to detail. That demand on your time increases as your staff grows. Each pay period becomes a series of checks and balances to ensure no errors are made while handling a considerable amount of data that varies from employee to employee.
The inability to relinquish control, and the failure to delegate tasks to better manage your time is a bad business habit you need to give up.
- Overhead costs are reduced
As a business owner, your time has a dollar value that’s linked to the revenue you generate from the tasks you handle at any given time. The time you are able to save each day is money earned.
If you look at the total time you spend on payroll each pay period compared to the costs of outsourcing, you’ll see a great deal of cost savings when you take those tasks off of your plate.
- Improved data security
There’s a fair amount of risk that comes with in-house payroll. The door is wide open for identity theft. Employee records can be viewed by those who handle payroll. Employees can tamper with records for personal gain, and there’s also the risk of embezzlement.
Aside from these employee risks, you’ll need to consider the security of your payroll software. While the software itself could be relatively secure, you may house your data on a server or network with security flaws that could leave you open to data theft.
- Guaranteed government compliance
Payroll firms understand tax law. It’s their business to keep up with the rules, regulations, and changes in tax law. They guarantee accuracy and compliance. If there are mistakes, they’ll make corrections while handling the liability of any errors they may make.
- Access to a variety of services
Aside from the standard payroll and tax calculation, some platforms offer additional value-added services like contract generation, contractor services, labor law compliance, access to health benefits, workers’ compensation payments, and bookkeeping services.
A worry-free payroll
A professional payroll provider employs people who know payroll processing–professionals who specialize in the complexities of regulations, government compliance, taxes, and human resources. It’s what they’re trained to do and the core of their service guarantee. You can save yourself a lot of time, money, and he
Why Payroll Is One Function You Should Outsource
But the question business owners and managers want answered is: what do you actually gain from outsourcing payroll? Is it worth all the time and effort just to investigate and identify appropriate outsourced service providers? Then there’s the work involved to transition the function outside to the third party service. Do the benefits of outsourcing outweigh that effort? chose to outsource the functions to reduce the risk of the payroll not being processed, to manage growth by anticipating the increased payroll responsibilities that will be required as the firm grows and hires more employees, and to keep up with technology, such as pay cards and direct deposit.”
Ideally, outsourcing achieves three main goals:
- It frees up time and resources to focus more on your core business.
- It gives you access to more technology and expertise to perform payroll well.
- It reduces costs and risks.
Payroll Software vs. Payroll Service
There are two basic ways a business can carry out payroll:
Option 1: You can do it yourself using payroll software. Online payroll software applications work in a similar way to tax software. They give you a handful of prompts and information, but you—or someone in your business—must do all the input. The software company can offer online support, by phone, chat, or FAQs.
Option 2: You can outsource your process by giving a payroll service the basic information on employees and letting them run payroll, send out paychecks, do all of the reporting, and sending all the payroll tax payments out
Outsource payroll the right way
With payroll outsourcing, it often comes down to what’s most efficient and cost-effective for your business. It pays to do your homework and assess your business needs before making a decision. If you get the right provider, you’ll spend less time thinking about payroll and more time doing what you do best – running and growing your business.