Should You Outsource Payroll in Your Business?
Managing payroll can be one of the most time-consuming tasks of running a business. The stress of paying employees and maintaining records might have you looking for a better way. If so, you might wonder if you should outsource payroll.
Outsourcing payroll can be an efficient and affordable way to manage your employment costs.
Learn the benefits of outsourcing payroll for your business and the best way to do it below.
What Does it Mean to Outsource Payroll in Your Business?
Outsourcing payroll is the process of hiring a third party to manage your payroll functions from simple to complex. You’ll then take a hands-off approach to the day-to-day management of payroll.
Common duties of a payroll service include:
Paying employees
Setting up payroll software and employee accounts
Tracking time and calculating wages
Monitoring payroll compliance
Withholding taxes and garnishments
Remitting taxes to the IRS
Deducting employee retirement contributions and insurance premiums
Compiling payroll documents for end-of-year tax planning
The best way to outsource payroll is by using one of many payroll software platforms. Payroll software or software as a service (SaaS) makes outsourcing easy and efficient through automation.
5 Benefits of Outsourcing Payroll in Your Business
1. You’ll Save Time When You Outsource Payroll
The biggest benefit to outsourcing your payroll is time savings. Payroll tasks are often time-consuming and tedious, and when you do them yourself, you end up spending more time on administrative payroll duties than you do actually running your business.
Outsourcing payroll lets you automate the complicated process of distributing pay, calculating wages, and filing tax reports.
By outsourcing, you free up valuable time you can use for strategic business planning or performing core functions. Using a payroll service or software lets you get back to what you do best – running your business.
2. Payroll Accuracy and Compliance
Payroll law is long, confusing, and different in each state. On top of state laws, federal labor and payroll tax regulations have their own set of requirements. Trying to be a payroll law and tax expert while running your business could lead to mistakes. Even an unintentional mistake could mean expensive penalties for your business.
Payroll service providers specialize in payroll taxes and labor laws meaning your payroll will always be accurate and compliant. They’ll know when employment tax reporting is due or how a new state law might affect your employees.
Ultimately, you’ll lower your risk of errors and the penalties that come with them when you work with an outsourced payroll service.
3. Outsourcing Payroll is Cost-Efficient
Doesn’t outsourcing payroll cost money?
Yes, but a payroll service is an investment in your business. Outsourcing your payroll generally costs less in the long run than hiring an in-house payroll team or doing payroll yourself.
Hiring a new employee or human resources team can drain your monthly cash flow. In addition to ongoing employee pay and benefits, there’s an initial cost to hire and train payroll employees.
Trying to manage payroll by yourself, however, could lead to costly mistakes and fines.
A payroll service takes care of both of these problems by doing the following:
Payroll service providers need very little onboarding to get your payroll system up and running. This means you won’t have to spend months training an employee to do the work.
A payroll company focuses only on payroll, so you can be sure your data is accurate and in compliance with regulations.
4. Outsourcing Payroll Adds a Layer of Security and Data Protection
According to data from IBM, the average cost of a data breach is nearly $4.5 million. As a business owner cybersecurity is one of your top concerns.
However, managing payroll on your own could open your business up to cyber-attacks. You may not have the necessary security measures to stop and data breach before hackers get access to your employee and payroll data.
A payroll service can help alleviate your cybersecurity fears. As companies that deal with sensitive data every day, payroll services invest in the tools and resources needed to stop cyber-attacks. With the latest in cybersecurity tools, your payroll service provider helps reduce the risk of you or an employee experiencing identity theft.
5. Streamlined Reporting Comes with Outsourced Payroll
Many business owners are surprised to learn that outsourcing payroll could help them save money.
An unexpected benefit of payroll services is enhanced reporting tools. Most payroll services give you access to analytics on your payroll data, including:
Labor costs
Employee performance
Potential discrimination in pay or benefits
Employee retention
Training and onboarding costs
You can use this data to form insights into your labor performance and costs.
For example, you find that the average employee training takes two days. You streamline training so all employees are trained in a day, saving you money on training time.
Still Unsure if You Should Outsource Payroll in Your Business?
Outsourcing payroll can help you save time and money by automating payroll tasks. In addition, a payroll service reduces your risk of noncompliance with labor laws and employment taxes.
Accounting Made Accessible is here to help you find the perfect payroll software solution. Our knowledgeable team can answer your payroll outsourcing questions and address your concerns.
Ready to learn more about outsourcing payroll? Book a free strategy call with us today.