Why companies should outsource payroll services

Routes to finance

Why should I outsource payroll? A payroll company explained

Teresa Ray, Owner and President of The Payroll Department, Inc., answers your questions about the benefits of outsourcing payroll.

Isn't it more expensive to pay someone else to do my salary work?

It is certainly NOT more expensive to post your pay slip. When you factor in an employee's wages and add benefits that can add up quickly.

If you own a very small business and are trying to do a payroll yourself, the cost of your time is even higher.

Also, when you outsource your payroll, you don't need to worry that your payroll company is sick or wants to take vacation OR apply for possible maternity leave that you will have to pay for. There's also confidentiality when it comes to payroll. If an employee wants to "share" how much a colleague is doing, it can lead to extreme drama in the workplace.

What can a payroll service do that I can't do myself?

You can do anything a payroll service does, but there's a reason they do it as a profession. Changes in payroll have happened all along like never before in payroll history. You, as an entrepreneur, must take the time to keep track of the changes in addition to processing the payroll, pay wage taxes on time, submit all wage tax reports on time and process W-2 at the end of the year.

Wouldn't your time be better spent growing your business?

How secure is the information?

Payroll information should be extremely secure and this question should be asked when interviewing a payroll company. The question of whether the company is paperless would be another big question. It's much better if documents aren't lying around with sensitive information like social security numbers.

How do I know the service is doing things right? What if you make a mistake?

Don't know if the service is doing things right, but it would be a big red flag if you get messages from any of the various federal or state agencies.

The wage forms throughout the year are like "quiz" and the "final exam" is the W-2. W-2s MUST match exactly with all forms submitted during the year or they will be rejected. If the payroll department makes a mistake they should be ready to correct it BUT, ultimately, the business owner is responsible. You still need to know how payroll works and what payroll laws apply. You also need to monitor your payroll service provider.

What questions should I ask about a payroll service?

  • How long have you been in business?
  • How do I know you pay all wage tax?
  • How much responsibility do you have for payroll?
  • How secure is the information?
  • Can I call and speak to a real person without waiting in line for several minutes?
  • How long will it take to make corrections in payroll?
  • What are your payroll processing fees?

Give me three reasons why I should outsource my payroll.

  1. Time! ! First and foremost, it takes time to keep up with all state changes, and that doesn't include state payroll tax demands and changes. For example, Ohio is one of the most difficult states to create. In addition to having state withholding tax, Ohio may have city, school district, and council taxes. All of this is based on the employee's address, so it takes time to research each employee. Every state is different and has different requirements. Every employer must be compliant or severe penalties may apply.
  2. Money! ! The cost of outsourcing a service shouldn't even come close to the cost of an employee.
  3. Accuracy! ! Once the employer has done their homework to research a good payroll service, they should have peace of mind in the knowledge that their payroll is being done accurately so they can avoid penalties and interest on their payroll.

Should I use an online service or a "real live person"?

Online services provide the software for the employer to process the payroll, but the employer must still be aware of any changes. You need to take the time to learn the online service process. In the event of a problem, the payroll must be corrected immediately so that the employee remains satisfied.

Calling a toll-free number would not be attractive to most business owners.

A "real live person" (accountant, bookkeeper, or CPA) that you know by name and are comfortable with is a much better option. You should be able to trust that your payroll service provider will handle and handle the entire payroll process on your desk. Do what you do best and outsource the rest!