Payroll Providers | Outsourcing Payroll

Pros & Cons of Outsourcing Payroll

Your business relies on its employees to grow and succeed. You’ve got to be able to calculate tax payments, deductions, and a host of other factors. It’s no wonder that payroll is one of the functions many small businesses outsource. In addition to the risks, we’ll take a look at the benefits of outsourcing payroll.

Payroll providers may offer your business great benefit. Before outsourcing payroll, you need to keep some things in mind:

1.Outsourcing payroll isn’t always beneficial. If you’re in a small business with a fairly stable staff, and if your business is such that you’re not likely to experience significant changes in tax obligations, you might be better off keeping payroll internally. Even if you outsource payroll there are still activities you need to do in order to manage the process, and in the long run it may not save you as much time as you think.

2.Outsourcing payroll makes sense for businesses that have changing payroll. If you have part-time employees, employees who work overtime, or a high turnover, a payroll service will almost always save you money. If you need to pay out payroll taxes across multiple states or jurisdictions, it can be very helpful as well.

3.Payroll services offer a suite of basic services. Generally, you use a payroll providers to calculate the pay and taxes for employees, deliver checks, and give you reports on that process. The service can issue checks at the frequency you desire, such as weekly, bi-weekly, or monthly. In addition to those basic services, you can add on other features from your payroll contractor such as automatic check signing, direct deposit, and issuing of W-2 forms.

4.When you choose a payroll provider for outsourcing payroll, customer service should be at the top of your list. It’s not like your telephone provider; you rarely need to talk to them. Payroll providers are someone you’re constantly in communications with. If you don’t have a dedicated sales rep, make sure you are comfortable with the results you get after speaking with the provider’s customer service.

5.Geography matters. When outsourcing payroll to a company located three states away, you might face some problems trying to pick up checks in an emergency situation. That said, most payroll emergencies can be solved via FedEx, and so you can usually have what you need overnight.

6.Only outsource your payroll to a bonded payroll provider. Payroll providers must be bonded, otherwise your company can be the victim of financial missteps or other mishandling by the payroll company. That can lead to employee lawsuits, incorrect checks, and worse.

7.If you can, have your payroll provider file your employment taxes. Usually when you outsource payroll, the provider will pay those taxes on your behalf. They hold the funds until the due date, and which point they hand it over to the governmental agency. Generally speaking they’ll also assume any responsibility or penalties for late filing. In many cases, however, outsourced payroll companies won’t file local and city payroll taxes.

8.Be aware of all of the relevant costs. Pricing for payroll providers can vary dramatically. You can pay as little as $.80 per check or as much as $2.00 per check, in addition to a regular account fee. Direct deposit and other services may add costs, too. You might face a charge whenever you add or drop an employee, or when you change employee information, as well.

9.Shop around for the best payroll provider for your business. You’re looking for a provider that offers all of the services that you want (such as direct deposit or paying of local taxes), has exemplary customer service, and that does all of that at a reasonable price. It can be hard to find the right mix, but once you do you’ll be glad you shopped around.

10.Take extra care when switching payroll providers. There are almost always a few hurdles when it comes to switching from one payroll provider to another. Review those first few checks, as well as the tax information, carefully when you switch.

Outsourcing payroll can be a tremendous help to some companies. Benefits of outsourcing payroll include saving you all sorts of time and frustration. Just be sure to follow these tips to find the provider that’s right for your business.

Employees are happy starts with making sure they’re paid, accurately and on time. Payroll is in many ways one of the most important functions of your business.

Yet, there are a lot of details that go into payroll that can give the average business owner a headache. If you have questions about outsourcing payroll or the potential benefits of payroll providers, contact one of our tax professionals.

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