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Why Small Businesses Outsource Payroll

August 14th, 2012

blog_payroll-image Outsourcing payroll is an excellent alternative to in-house payroll processing for today’s small businesses. Through a relationship with a professional payroll services provider, an employer can expect to realize several benefits, including consistency and reliability, a reduction in cost and workload, reduced risk, expanded offerings for their employees and peace of mind.

Payroll can be a time-consuming headache for many small businesses as keeping track of benefit accruals, garnishments, new hires and terminations, not to mention federal and state payroll tax changes, are often daunting tasks. And at the end of each year, small businesses spend a significant amount of time on W-2 and 1099 preparation, all the time rushing to ensure that they are sent out on time. Outsourcing payroll can reduce stress and free up many hours of time that can be spent on tasks that impact the health of the business and the bottom line.

Keeping abreast of state, federal, local and industry-specific regulation changes can be a significant challenge for most employers, small or large. A reputable outsourced payroll provider has a staff dedicated to keeping up-to-date on all of the changes that could affect payroll, ensuring that their clients are in compliance.

Payroll companies also have a full staff on hand to process payroll. This is a huge advantage for small businesses because payroll will be processed on schedule even if the owner or payroll manager is on vacation or has an unexpected absence. Outsourcing payroll functions increases consistency and reliability because payroll will be accurate and processed on time each pay period. It also ensures that the company’s payroll expertise does not leave if the payroll manager does.

Payroll can be a time-consuming headache for many small businesses as keeping track of benefit accruals, garnishments, new hires and terminations, not to mention federal and state payroll tax changes, are often daunting tasks. And at the end of each year, small businesses spend a significant amount of time on W-2 and 1099 preparation, all the time rushing to ensure that they are sent out on time. Outsourcing payroll can reduce stress and free up many hours of time that can be spent on tasks that impact the health of the business and the bottom line.
Keeping abreast of state, federal, local and industry-specific regulation changes can be a significant challenge for most employers, small or large. A reputable outsourced payroll provider has a staff dedicated to keeping up-to-date on all of the changes that could affect payroll, ensuring that their clients are in compliance.
Payroll companies also have a full staff on hand to process payroll. This is a huge advantage for small businesses because payroll will be processed on schedule even if the owner or payroll manager is on vacation or has an unexpected absence. Outsourcing payroll functions increases consistency and reliability because payroll will be accurate and processed on time each pay period. It also ensures that the company’s payroll expertise does not leave if the payroll manager does

When comparing the cost of an outsourced payroll provider to in-house payroll expenses, consider the amount of time spent on payroll-related activities as well as the costs of printing and distributing or mailing checks, computer software, training and support. Because most payroll providers handle all of these, outsourcing payroll functions is usually a big cost saver. And outsourcing does not have to be expensive; many professional payroll providers offer packages for small employers as low as $50.00 per month.

And then there are the costs involved in penalties for errors, omissions or late payroll tax filings. The IRS reported assessing 7.7 million civil penalties for employment taxes alone in 2011, totaling $5.3 billion in assessments. Businesses who outsource payroll and payroll tax functions can dramatically reduce the risk of incurring payroll tax penalties; most outsourced payroll providers will calculate payroll taxes, manage filings and payments and will assume the cost of penalties incurred due to incorrect calculations or late payments, as long as the necessary information and funds are provided on time.

In addition to printing and shipping checks directly to your door, most payroll companies also offer the convenience and security of direct deposit services. Because pay is deposited directly into employees’ accounts, having to put a stop payment on a lost paycheck and reissue it becomes a thing of the past. Many payroll providers also offer a paycard service for unbanked employees, usually at little or no cost to the employer. Both provide the security and convenience of paperless payrolls.

Many small companies find it difficult to dedicate the proper resources to knowing all the ins-and-outs of payroll. Outsourcing with a reputable payroll firm offers employers access to some of the leading experts on payroll and payroll taxes in the country. And with guarantees of error-free payroll, accurate tax filings and timely payments, the worry that many experience when it comes to the business of paying employees is eliminated, providing just the peace of mind every small business owner needs.

120x60_Compupay Terri Tennant is the senior director of business development for CompuPay Inc., one of the top-five payroll providers in the United States. Since 1980, CompuPay has worked with businesses with one to over 5,000 employees to streamline their business processes, improve productivity and save money through their offerings of easy, flexible payroll solutions.

Image: Courtesy of FreeDigitalPhotos.net

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