10 Reasons to Outsource Payroll

Updated: April 30, 2009

Introduction

Few business owners or managers will cite payroll management as one of their favorite tasks. But when, from a strictly financial perspective, does it make sense to outsource payroll operations?

Analysis

1. Cost. Big businesses can afford to maintain big payroll departments. For small businesses, however, an in-house payroll service is a money burner. If your business has fewer than 20 employees, there's a very good chance that you can save money by outsourcing your payroll operations. Do the math. Figure out how many hours your employees are devoting to payroll-related activities, calculate how much you're spending and compare the amount to the plans offered by several payroll-services providers. Also, be sure to factor in the money your business spends on tasks like printing and distributing checks, creating tax documents, and the like. You'll probably be surprised by the result.

2. Productivity. Payroll management is a time-consuming activity. With this burden removed, your employees can focus on doing more productive things, and you may even be able to trim your staff's size.

3. Accuracy. Payroll mistakes can be painful, angering employees and — more ominously — the government. A good payroll-services provider is far less likely to make a serious error than your in-house staff. Furthermore, if a big mistake is made, you can seek financial restitution from the provider — something you can't do with your own employees.

4. Reliability. In-house payroll activities function as reliably as the people doing the work. With a payroll service, output speed and quality won't vary in accordance with vacations and illnesses. You also won't have to spend time helping new hires understand your business's payroll system.

5. Speed. Since payroll-services providers are specialists with vast technical resources at their disposal, they can process even the most complex payrolls at lightning-fast speed. Unlike most employers, they can also accommodate a temporary influx of seasonal workers without acquiring new systems that will remain dormant the rest of the year.

6. Insight. A good payroll-services provider will know all the ins and outs of payroll-related tax laws and regulatory mandates on the federal, state and local levels. Your employees could try to achieve the same level of understanding, but it would take a considerable investment in time and effort.

7. Accountability. If paychecks are delayed or paperwork is mishandled, it's the payroll-services provider's responsibility to fix things. If the provider can't (or won't) remedy the situation to your satisfaction, you can sue. You can also switch to another service provider in a snap — even if you have to eat a portion of an existing service contract. Try firing, hiring and training an in-house payroll staff in anything less than several weeks.

8. Flexibility. Boring, repetitive payroll work can act like an anchor on your business. Your staff, when freed of rote payroll responsibilities, will be free to focus on other, more creative work.

9. Security. Do you have the time and energy to closely supervise your business's payroll for time and rate abuses and other shady activities? Most payroll services firms have technologies that can spot and alert clients to various types of payroll fraud, such as payment manipulation and "phantom workers."

10. Worry. There's a lot to be said for the peace of mind that outsourcing payroll services can bring to a business owner or manager. No headaches, no hassles: You're left to focus on running a profitable business.

Featured Research
  • The Best HR & Payroll Features in 2021

    As companies look for cloud-based tools to support recruiting, employee onboarding and training, payroll, and benefits, HR and Payroll software solutions will be positioned for substantial growth every year over the next 5-7 years. But what HR and payroll features are going to be necessities for a changing workforce heading into 2021? This guide describes the functions of HR and Payroll software in the changing business landscape, provides insight into how your business can determine which tools you need, showcases some stats and facts about the HR software market, and outlines the best features and functionalities of Payroll and HR software. more

  • Security Software for Mid-Sized Companies in 2021

    Due to increasing cloud software adoption and a growing number of connected devices leveraged for business, security software is not just a mission-critical necessity, but also a strategic advantage that can be leveraged to secure company data, protect networks, and ensure that all endpoints are open only for authorized, trusted employees. This guide explores recent statistics around cybercrime and endpoint security, outlines the key functions of cybersecurity and endpoint security software, and highlights some of the security industry leaders to watch in 2021. more

  • Leading CRM Trends and Solutions for 2021

    CRM software is an invaluable tool for improving customer and client relationships with easy-to-access information and real-time updates, the use of CRM is always evolving. 2021 is approaching quickly, bringing with it a new wave of innovation in CRM technology and capabilities. This guide explores upcoming CRM trends and highlights some of the top CRM vendors you should be watching in 2021 and beyond. more