Top Reasons You Should Use Payroll Outsourcing Services
Some businesses prefer to perform payroll functions themselves, either manually or using do-it-yourself payroll apps. Others prefer professional staff payroll services. A third option is outsourcing payroll to a third-party company. Is outsourcing is a good fit for your business? Time and cost are just two of the major factors in decision making. Here are even more reasons why payroll outsourcing services give you a simpler, stronger business.
First, the difference between outsourcing payroll and in-house payroll
Inhouse payroll management refers to the process of internal processing of employee salaries. These tasks are done by a hired employee, perhaps an in-house accountant or your HR department. For many small businesses, the business owner or manager will be running payroll themselves. The tasks they accomplish include payroll, paying employees and contractors, and handling benefits administration.
Outsourcing payroll is when a business hires a third-party company to do payroll tasks for them. The same crucial payroll tasks are accomplished, but usually at a different rate and with different benefits.
The challenges of payroll responsibilities
Time-consuming
Payroll tasks are carried out each pay period. The complexity of payroll processes requires a considerable amount of work daily and weekly. When it comes to calculating wages and distributing the payroll taxes and returns, the time and money you’ll spend on payroll can be costly. Especially as your business grows, the tasks become more complex and time-consuming. And if your staff resides in different states, there are more steps that must be taken.
Complex Tax Rules
Although the employee’s pay is organized and recorded it remains taxable in each quarter and at each year’s end. Generally, business owners can prepare payroll taxes to be paid every three years and remit the correct payroll tax on their income. Forms are submitted with a proper tax refund to the IRS in one quarterly filing period. Businesses must provide an annual payroll tax statement to confirm each quarterly figure and calculate the remainder due.
With all of these rules and guidelines, it can be easy for someone inexperienced, rushed, or distracted to make mistakes. Those mistakes can be costly. In 2020, over $6 billion in penalties were issued to businesses that had problems with employment tax, according to the IRS. Issues with late payments, failure to pay, bad checks, and inaccuracy were the leading offenders.
High Costs
Salaries for those in accounting or HR departments can be costly when having payroll services done in-house. In addition to that, you are paying for HR software that has a range of prices. If you choose to run payroll yourself or have a manager or employee add it to their tasks, consider their time as money. Could they be spending their time on something they are better qualified for? That brings in more money for the business?
The Benefits of Payroll Outsourcing Services
Mitigate payroll mistakes
Payroll error can cause a lot of frustration for the employer, as well as for employees. A state tax-deducted employee may receive an unexpectedly large tax deduction for their final paycheck during the holiday season. Moreover, faulty hours or a low wage will reduce an employee’s earnings. This mistake may negatively impact a company’s workforce and ultimately result in employer/workforce strain. For employers, payroll errors could lead to penalties for incorrect calculations or loss of revenue.
Choosing payroll outsourcing services will mitigate mistakes and keep your employees happy. A great deal of stress can be removed from your job duties when you know the complexities of payroll are being handled by a company that has years of experience. They will take responsibility for the crucial tasks they care for.
Potential time saved
The processes for payroll are time-consuming regardless of employee count. Usually this costs time that would have otherwise been used in other pressing business activities like increasing revenue and serving customers. With payroll outsourcing, the owner can focus on the things that matter most to them. The payroll outsourcing company may offer several options for maximum tax savings during the pay period as well.
What is the average cost of payroll outsourcing?
A number of different factors can influence outsourcing payroll processing. Although the typical cost is approximately $200 to $250 per worker per year, the cost is dependent on the scope of the payroll services being done. Many payroll outsourcing companies will work with you to generate a quote specific to your needs. They may charge based on employee, paychecks per month, and may charge additionally for features like direct deposit. Don’t just go off what is listed on their website, talk to a representative to get a custom quote at a budget that works for you.
Payroll expertise
Payroll outsourcing companies employ accountants and bookkeepers with a deep knowledge of payroll. This group is dedicated to dealing with complex payroll and tax issues and ensuring compliance with government rules. They are experts at the payroll software they use. They can work quickly and efficiently since they are dedicated and trained in their niche.
Enhanced security of payroll data
Payroll processing may be complicated and risky when it comes to security. Even trusted employees have the potential for identity fraud and tampering. Payroll outsourcing is the best solution to provide security and confidentiality for your sensitive payroll information. A good payroll company invests in modern data storage solutions in order to protect client information. When outsourcing payroll, you can rest assured that security concerns are no longer in the back of your mind.
Generating reports
During the last payroll period, all employees are expected to file payroll taxes as soon as possible. The payroll report can be included in a business report based on business size or structure, if the company’s business is publicly-traded or currently seeking investors. While such reports can not always be used, most business owners analyze past payroll data to create hiring forecasts.
By outsourcing payroll, you will also receive detailed reports and insights you may miss when you run payroll yourself. Payroll outsourcing companies can pull reports on whatever data you need. You may also be able to consult with an accountant at the company to use the data to make better decisions for your business.
Ways to Save Money Outsourcing Payroll
You don’t have to outsource everything if you’re looking to save money on outsourcing payroll services. Check out this list of common payroll tasks and see which make sense to take care of in-house, and which can be outsourced.
- Employee time and attendance.
- Calculate gross pay.
- Withhold or garnish wages.
- Paid time off (PTO) and sick leave.
- Salary and hourly payroll records.
- Send paychecks.
- Direct deposit.
- New hire reporting.
- Payroll tax statements.
- Worker’s compensation.
- Tax forms and payroll tax filings.
- Federal, state, and local year-end taxes as well as W2s.
- Comply with federal and state legislation for employees
- Tax payments, including social security and state unemployment insurance.
- Employee benefits and deductions.
- Online self-service portal
There can be considerable savings if you outsource just the basics. And it can be wise to outsource only what takes you the most time to do. And there may be some payroll tasks and features that aren’t even necessary, that you don’t want to pay for. Finding a payroll outsourcing company that offers flexible and customized pricing can be a great way to save money.
How to choose a provider for outsourcing payroll?
First, know what you need. Answer the following questions to get a good idea of what payroll outsourcing services you’re looking for.
- How often do you run payroll and pay employees?
- Where do your current employees live and work?
- Will the number of employees you have change in the next year or two?
- What special situations or industry-specific circumstances do you have?
- What are your health insurance requirements?
- Do you need to track 401k deductions?
- Do you have software that payroll needs to integrate with?
- Do you need payroll services that include contractor payments?
- Do you want a dedicated accountant that you work with?
- Are you comfortable with a fully remote payroll service?
- What level of customer service and support access do you want?
Now that you know your individual needs, you’re ready to find the company that does the outsourcing payroll services you need. Also take into consideration the cost and find out how much time you’ll still need to spend working with your payroll provider.
If you want to work with a company that has excellent customer service, decades of experience, and a payroll service that shortens your management time to 5 minutes a pay period… Let’s talk! Lin company is here to make outsourcing payroll lightning-fast, at prices comparable to the most popular DIY software solutions out there.