27 September 2018 in The Call Takers Blog

The Benefits Of Outsourcing Your Payroll

The Benefits of Outsourcing Your Payroll

Want to grow your business faster? Start outsourcing your most tedious back-office tasks.


Payroll is an essential part of your business, much like sales, customer service, and even content marketing. It's not just a twice-monthly annoyance or a bookkeeping task. Payroll is how you reward and retain employees, compensating them for the work they've done. When there are errors due to miscalculation, you'll wind up with dissatisfied, unmotivated employees.

Calculation errors are not the only concern, however. There are hundreds of tax codes and payroll regulations that you need to understand. A payroll mistake with any one of these items can be costly:

Classification of employees and contractors W-2 forms Tax deposit and filing deadlines Overtime payments State unemployment taxes Garnishments and levies Taxable items

These are just a few of the errors that a payroll service can help minimize. In 2013, the Internal Revenue Service issued 6.8 million penalties, totaling $4.5 billion related to employment taxes alone. The penalties aren't surprising when you consider that some 40% of small business owners don't use an accountant at all.

"There are so many little rules for a small business owner to stay on top of," says David McKelvey, a tax and business consulting partner at New York-based accounting firm Friedman LLP.

Although some small businesses may opt to handle payroll internally, there are a number of benefits for you and your business if you decide to outsource your payroll to a knowledgeable and reputable payroll vendor.

1. Outsourced payroll saves time

"One of the major challenges to in-house payroll processors is simply the amount of time it takes to complete and the inability to find much in the way of efficiency," writes Karen McMullen from The Staffing Edge.

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.

That's time taken away from the core tasks that help you manage and grow your business. When you outsource your payroll, you immediately free up all that time. You can devote that free time to refining sales and marketing strategies and improving workflow efficiencies. 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.

2. 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. With that in mind, think about all the time you've spent, and continue to spend, on these payroll tasks every pay period:

Calculate employee hours, deductions, paid time off, sick leave, and taxes Print, sign, and distribute paychecks or stubs to employees Process direct deposit payments or electronic payments Generate payroll reports Prepare and submit local, state, and federal payroll taxes

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.

3. 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.

Comparatively, outsourcing your payroll typically means your data is stored on highly-secure servers that use cutting-edge encryption technology, along with redundant data backups.

If you want this same level of security on-site, you'll need to spend a significant amount of capital to create a secured network. Cloud-based payroll services like WagePoint.com don't charge extra for this kind of security, as this state-of-the-art approach to storing and protecting data is simply a standard part of the service.

4. Guaranteed government compliance

I mentioned the potential costs of payroll mistakes, which are a very real possibility. Just because you're not an expert in the complicated realm of government tax regulations doesn't mean you aren't responsible for mistakes. You're still legally responsible for any cases of misrepresentation or failure to file accurately with federal and state agencies.

"As an employer, you also need to understand wage and hour laws," says Andy Childs, a vice president of Paychex. "For example, you need to know when you are required to pay overtime."

Even a single mistake can leave you open to audits and costly penalties. Because regulations change constantly, often many times throughout the year, it's unlikely that you can stay on top of all of these changes when your focus is to run and grow your business.

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.

5. Access to a variety of services

Even a seasoned accountant has a limited skill set. With outsourced payroll services, you typically get a variety of services and the benefit of an entire organization.

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.

Identify the services most relevant to your needs and find a provider that delivers those services, or one that will allow you to customize a plan based on your specific needs.

See our selections for Best Payroll Service.

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 headaches when you outsource your payroll, so you can get back to growing your business.



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