Home / News / Outsourcing / Outsourcing Payroll Services: What You Need To Know

Outsourcing Payroll Services: What You Need To Know

Outsourcing Payroll Service: What You Need to Know

In today’s business world, companies are on the lookout for ways to cut costs and be more efficient. Because of this, payroll services are being outsourced as an alternative to in-house processing. When it comes to paying employees, filing taxes, and other related duties, it’s easier for a company to use an outside service rather than use their own employees for these time-consuming tasks. However, prior to outsourcing payroll services, there are many factors to take into consideration. If your company is pondering the pros and cons of outsourcing payroll services, here are some key points to keep in mind.

Saving Time

Based on a 2013 survey conducted by the National Small Business Association, payroll tasks were ranked as the second-most burdensome administrative task. Since each pay period usually requires tremendous time and effort from employees to make sure everyone gets paid on time, outsourcing these duties can not only save your company money, but also free up employees to work on other important tasks.

Greater Security

Since protecting personal information such as social security numbers, dates of birth, and other data is so vital in today’s age of technology, using an outside provider for payroll services can in many ways offer greater security to your company. By using redundant backup systems and multiple server locations, an outside provider can employ secure systems utilizing the latest technology to protect sensitive employee and client data.

Cost Reduction

In addition to using hours of employee time to process payroll data, this task also has many other costs associated with it, such as printing and signing checks, creating reports, and completing payroll taxes. However, by outsourcing these duties, employees that would be working in these areas can then be used on other profit-generating tasks, helping your company become more profitable.

Compliance With Tax Laws

Since tax laws tend to change year after year, it can be difficult to know how these changes will affect your company’s payroll. However, if you fail to keep up with the changes and make a mistake on the taxes, the penalties can be quite severe. However, this is considered one of the biggest benefits of using an outside payroll service, since they are paid to know the laws inside and out. So rather than try to keep up with the ever-changing laws yourself, it’s usually more cost-effective and efficient to let an outside payroll provider ensure your company is compliant with all rules and regulations.

Payroll Errors

While there are many advantages to outsourcing payroll services, there are certain things that can make the process difficult at times. One of the most common involves payroll errors, which are inevitable for virtually all companies. In situations where mistakes have occurred, there may be a delay in correcting the errors, which can lead to employee dissatisfaction. Therefore, it’s best to expect a problem now and then, and have a contingency plan in place.

Wage and Employee Data

Along with a rare payroll error occurring, it can at times be tough to obtain wage and employee data if needed. In most cases, this is due to the data being stored on another company’s server. To make this process easier, try to have backup data on your company’s servers, which will allow you easy access when needed.

Compare the Costs

While in most cases it’s much cheaper in terms of labor and equipment costs to outsource your company’s payroll needs, that may not always be the case. Since all vendors do not necessarily tailor their services to the size of a company, you may find you’re paying too much for these services. To avoid this, research several companies prior to making a final decision on outsourcing, and try to work with a payroll provider that will let you pay only for the services you need.

Choose an Established Payroll Vendor

Once you’ve made the decision to outsource your payroll duties, it’s a good idea to make sure you choose a vendor that is well-established and has an excellent reputation. Otherwise, if you choose to use a vendor that has just started their business, you could potentially find yourself facing a number of problems. For starters, the vendor could go out of business, leaving you scrambling to complete your payroll. In addition to this, a vendor that’s out of business may lead to you losing access to employee and company data, and may also keep you from recouping money you’ve already paid for their services.

Accuracy and Reliability

Since a payroll company does nothing but concentrate on this aspect of your business each day, it’s a good bet they will be very accurate and reliable in order to keep you as a customer. According to a survey conducted by the Internal Revenue Service, one out of every three businesses is affected by payroll errors. Because of this, it’s best to choose a company that has an excellent reputation for being accurate and reliable. If possible, ask for names of other companies they do business with, and check with those companies to see if they are satisfied with the service they receive.

Ultimately, It’s Your Responsibility

While outsourcing payroll can be a much more convenient option for companies big and small, it’s important to note that no matter what happens with your payroll good or bad, it’s ultimately your responsibility. Whether it’s filing taxes on time with the IRS or ensuring your employees are paid on time, your business will still be responsible for anything that goes wrong.

By taking all these factors into consideration prior to outsourcing your payroll services, you’ll be able to make a much more informed decision. Whether it’s cutting costs for your company or ensuring you are in full compliance with current tax laws, outsourcing your payroll services can provide numerous benefits.