Even though some companies choose to handle payroll functions in-house using manual bookkeeping or do-it-yourself payroll apps. Other business owners have come to prefer the expertise of a professional payroll provider,
The amount of time and money needed to complete crucial payroll tasks frequently plays a significant role in the decision to outsource this function. According to a recent Paychex poll, HR professionals reported spending on average 11 hours per week processing payroll, with an additional 4.9 hours spent processing employee benefits, and another 1.8 hours managing time off. Combined, this amounts to over 17 hours spent each week on tasks that can largely be automated with the help of an outside payroll services provider. Business owners who place a high value on their time and peace of mind often end up outsourcing payroll. By partnering with a full-service provider, most of their payroll responsibilities wage calculations, tax withholdings and deposits, and reporting, are taken care of for them.
Top reasons to outsource payroll
Employers who don’t have the administrative resources or the expertise to run the payroll on their own may want to seek professional assistance from a third party. Other reasons for outsourcing payroll are that it helps:
1. Save time: Payroll processing inside your business is a time-consuming process. Keeping track of benefit deductions, garnishments, new hires, and terminations paid time off as well as federal and state regulatory changes can be frustrating tasks. Each year significant labor hours are spent preparing W2s and ensuring that they are sent out timely. Outsourcing payroll allows employers to concentrate on their core business and frees up the business owner, human resources, or accounting personnel to work more on strategic tasks that could ultimately affect your bottom line. Regardless of the number of people employed by your business, attending to payroll demands a great deal of time and attention to detail.
2. Minimize payroll errors: Payroll providers automate many of the labor-intensive aspects of payroll, thereby reducing the mistakes that commonly result from manual calculations and data entry. The IRS states, 40 percent of small businesses pay an average penalty of $845 per year for late or incorrect filings and payments. Penalties for errors, omissions, or late payroll tax filings can be very costly. Payroll mistakes are painful, angering employees, and not reporting them timely or accurately to the government raises red flags to the IRS. Small business owners aren’t experts in the challenging world of government tax regulations. At the same time, they are legally responsible for any cases of misrepresentation or a failure to accurately report employment taxes to federal and state government agencies. Mistakes lead to audits and penalties situations no business wants or needs. Government rules and regulations are always changing and business owners can’t be expected to stay on top of these changes. Professional payroll providers, on the other hand, must stay current with rules, regulations, and changes in tax rates. A good payroll-services provider is far less likely to make a serious error than your in-house staff.
3. Improve security: Outsourcing payroll to a trusted provider that invests in state-of-the-art technology and has redundant backup and multiple server locations can help employers safeguard their confidential data. Payroll processing is a complex and potentially risky business operation. Even with long-time trusted employees, there is always a risk of identity theft, embezzlement of funds, or tampering with company files for personal gain. There’s also an evident risk when using in-house payroll software: How safe and secure is payroll data on the company’s server or network? This very real question can consume a business owner’s energy and attention as well. In addition to redundant backup and multiple server locations, a quality payroll provider invests in state-of-the-art systems for storing and protecting data, simply because it’s part of the service provided to clients.
4. Maintain compliance: Payroll providers stay on top of changing government regulations so employers don’t have to and will often take the lead in filing all paperwork necessary for compliance.
5. Integrate data: When payroll is fully integrated with time and attendance, benefits, and other HR applications, it improves data accuracy and makes it easier to access information through single sign-on.
6. Facilitate employee self-service: Full-service payroll typically allows employees to view their pay information, log their hours, and manage their withholdings – all from a mobile device.
7. Reduce cost: Payroll providers charge fees, but when compared to the cost of the fines and penalties that can result from mistakes, outsourcing payroll may actually save businesses money. The direct costs of processing payroll can be greatly reduced by working with a payroll provider. Big businesses can afford to maintain robust payroll departments. However, for Small/medium-sized businesses, having an in-house payroll process is a money burner. If your business has fewer than 30 employees, there’s a very good chance that you can save money by outsourcing your payroll operations. Do the math. Figure out how many labor hours your employees are devoting to payroll-related activities, If you are the owner of a small to medium size company and you are trying to do payroll yourself or in-house, the cost of the time spent is even greater. If you outsource payroll, you don’t have to worry about your payroll processing company calling in sick, resigning, wanting to take a vacation, or wanting to request a possible maternity leave that you have to pay for.
What features do payroll outsourcing providers offer?
Payroll outsourcing providers that have the knowledge and technology necessary to produce accurate, timely results generally offer these key features:
- Payroll processing that integrates with an accounting system, if needed
- Payroll tax filing
- Employee self-service anytime, anywhere, from any device
- Employee pay options, including direct deposit and paycards
- Year-end processing, including Form W-2, wage, and tax statement
- Wage garnishment processing
- Payroll and custom reporting
- Employee recordkeeping
- New hire reporting
- Accessible client support
How to Choose a Provider for Outsourcing Payroll
Knowing what to look for in a full-service payroll provider can help smooth the transition, minimize disruptions for employees and preserve peace of mind. When assessing potential partners, employers generally follow these steps to ensure that outsourcing payroll is a success:
- Determine requirements
- Address compliance: Adhering to multi-state and multi-national jurisdictions adds another layer of complexity for payroll providers.
- Evaluate service provider history: Reputable providers tend to have stable ownership, strong finances, and a track record of successful implementations.
- Look at peer reviews: Industry analysts and clients who have used the provider’s payroll services can provide outside perspectives and help validate decisions.
Why outsource your payroll to Tax Plus Financial Services?
Employers choose Tax Plus Finacial Services because we are quality professionals whom you can trust. Whether you prefer to file online or in person, we’ve got you covered!