Only business owners can tell how many tasks it takes to establish, run, and manage a business effortlessly. And among all business activities, payroll is the most crucial one, which is also the most time-consuming and critical ordeal.
The process involves calculating employee wages, payroll tax filing, wage garnishments, payroll reporting, employee recordkeeping, etc., which handling in-house can be daunting. Efficient payroll management is a cornerstone for any successful business in the US, and being a time-consuming process, there is a high possibility that managing the entire process in-house can lead to payroll errors and compliance risk. But here is the fact, in this modern time, there is a solution for everything, and for now the best solution for payroll management is outsourcing your payroll.
Keep reading to explore the top 9 advantages of outsourcing payroll. We will discuss how outsourcing can help manage your payroll effectively and let you streamline operations.
Why would businesses choose to outsource payroll? Well, first of all, the entire process takes a long time and manpower for a company to manage their payroll, which can ultimately hamper productivity and lead to hiring more employees experienced in human resources and payroll to ensure a thorough process, and outsourcing in this case is the solution for both. So, that’s two of the advantages. But there are many; let’s talk briefly.
So, as we mentioned, managing in-house payroll requires experienced and dedicated employees. Not only this, but you are going to need payroll software and resources that will add up. On the other hand, outsourcing the payroll process to a third-party company takes only getting a good deal with a reputed third-party company.
If you calculate the cost related to hiring payroll specialists, purchasing software, and staying updated with the regulations, it will come to an amount of nearly or over $50,000 annually.
But by outsourcing the process to a company that already has expert manpower and dedicated software, the cost will eventually be cut in half.
Here’s a table comparing the probable cost of in-house payroll management and outsourcing:
| Cost Category | In-House Payroll Management | Outsourced Payroll Management |
|---|---|---|
| Payroll Specialist Salaries | $30,000 – $50,000 | N/A |
| Payroll Software | $5,000 – $10,000 (annual) | Included in service fees |
| Compliance and Regulation Updates | $2,000 – $5,000 | Included in service fees |
| Training and Development | $2,000 – $5,000 | N/A |
| Hidden Costs (Errors, Penalties) | $3,000 – $5,000 | Minimal (covered by provider) |
| Total Annual Cost | $50,000+ | $20,000 – $25,000 |
Although the cost will mostly depend on your business size and the complexity of payroll management, according to Indeed, the average annual salary of a payroll specialist is $41,220.
Also, with outsourcing, you can easily invest in more critical areas of your business, maybe business development or marketing!
Regulatory compliance is the most dramatic area of this section. It’s like a jigsaw puzzle where you maybe come up with polished, completely expertized work for one section and notice something has just changed. Yes, this is actually the most frustrating part of managing your own payroll; no one wants to dedicate all the time and effort just to managing one big section of business that is not even directly connected to their productivity. Here comes payroll outsourcing as a magical solution. The payroll processing experts act like alchemists of the sector, constantly staying one step ahead of the evolving tax regulations.
Time is one of the most important resources for any business. Payroll processing occupies a major part of the time spent by any HR department. From salary and deduction calculation to filing taxes, payroll takes hours of meticulous work that could otherwise be utilized in growing your business. Now if you outsource payroll, you are saving crucial hours that your team may channel into various strategic initiatives instead of addressing the payroll cycle only. Just imagine how many hours you’ll be saving every month and think of all the things you could do to increase your productivity in something like customer service, marketing, or operations.
Just know that payroll is not simple, and not everyone in your team has the required expertise to manage payroll without issues. But it’s crucial to ensure the complete process runs effortlessly and error-free, and here comes the need for hiring experts in handling payroll responsibilities. By outsourcing payroll, you will have access to a team of specialists who actually live a life for payroll management. Dedicated professionals understand tax laws, deductions, benefits, and compliance better than anybody else, providing accurate payroll processing each time. Even if you expand into a new state or even into other countries, the multi-state payroll complexities are no longer a subject of yours to worry about; there are already experts dedicatedly working for you who will never bat an eye at multi-state, national, or international payroll.
Keeping up with the ongoing payroll technology is just another unplanned cost for many businesses. When you’re managing payroll with your in-house employees, you’ll feel that there’s always a need for something. Software needs updates, new security features, and integration capabilities with your current systems, all of which require investment. If you want to think of something that gives you access to innovative payroll software without the added cost and headache, it’s outsourcing. It also offers real-time processing, ease of access to payroll data, and seamless integration with accounting systems. If your company is still doing payroll manually or using outdated software, outsourcing can give you that much-needed technological leap.
Mistakes in payroll management can hamper various crucial parts of a business. Mistakes in payroll management can result in disgruntled employees or cause legal issues that could be expensive to rectify. One wrong step is enough to create huge hassle for your company. In-house payroll management might be burdensome since several responsibilities fall on the team. But what if another company takes the task over and keeps doing just that, only payroll? Yes. By outsourcing payroll, you reduce the chances of errors. Your payroll process could be top-tier slick if it were handled by experts with the right technology
Prior to considering outsourcing as an option, you must have thought a thousand times if it’s risk-free for your business; what you never thought about was whether doing it in-house is risk-free for your business or not. Payroll contains sensitive employee information like social security numbers, bank details, personal addresses, and lots of other sensitive data of your business; a leak in this information may amount to severe damage to your business, and without having a team of experts if you think of securing this in-house, that will require appropriate cybersecurity measures, which is expensive and complicated to maintain. On the other hand, having another payroll business dedicated to working for your company can bring you peace of mind. The service providers have a robust security measure developed, ensuring your data is in the hands of a provider who has put in place top-notch security protocols.
The complexity of your payroll grows with the growth of your business. Increased number of employees, expanding business, added benefits—all of these will make payroll even more difficult to manage, and this could be quite hard to maintain with an in-house payroll team. How much money, time, and effort are you willing to invest in this non-core activity of your business?
With payroll outsourcing, it is easy to scale up. Whether you have one or fifty employees, the payroll management service providers are the ones to scale up the services to meet the new additions to your company without you having to invest in resources. With your business often changing and growing, it means that your payroll services grow right along with it to maintain a smooth payroll process.
Any business wants to grow with time. So whether you are a small business or a leading one, you will not want non-core processing like payroll management that can pull your focus away from what really matters, “growing your business.”.
When you’re busy calculating payroll or worrying about tax filings, you’re not thinking about the core activities that will help you improve customer service or launch new products. Outsourcing payroll enables a company to take these distractions away from them and their team. Imagine taking all the time you used for payroll and reinvesting that in brainstorming new strategies, attracting more clients, or enhancing operations.
Outsourcing payroll costs depend on several aspects: the number of employees, payroll frequencies, and level of complexities involved in your company. Generally speaking, companies spend between $15 and $100 per employee per month for outsourced payroll services. Outsourced payroll services are generally offered using three different pricing models, each of which may be better suited for various businesses depending on the need. In the section below, we outline the most common models and provide you with a general estimate of costs for a company with 10 employees paid biweekly.
Absolutely! As a small business or startup, hiring a team for payroll management, putting in a lot of effort, and investing a lot of time; none of these seem like good ideas. Doing the payroll management with the help of the in-house team will eventually kill productivity, add up costs after costs, and leave no time to focus on the business goal. That’s why outsourcing payroll has proved to be the most helpful for small businesses. This will save you from spending money on hiring in-house payroll staff and investing in payroll software while giving you access to professionals who ensure your payroll is well-processed, accurate, and compliant.
If payroll duties are taking up too much of your time, or you are experiencing frequent errors or struggling with compliance due to changing regulations, it might be wise to outsource. The main outsourcing decisions for payroll come when business owners are aware that their precious time could be put to better use elsewhere and focus on growth rather than payroll administration.
You surely are not going to be managing payroll by any service provider company you come across with. The selection of payroll processing companies will depend on many factors, including the level of customer support you need, their technology offerings, and experience with businesses similar to yours. Look for experience, sound data management, and solid customer service. To learn more about these top payroll outsourcing companies, read our blog about the best payroll outsourcing companies.
With payroll outsourcing come so many advantages that range from cost-savings and compliance to accuracy and security. Leverage the benefits of outsourcing payroll; leave the function in the hands of experts, saving your business from costly mistakes and freeing extra time to focus on what matters; to grow and succeed.
Sales organization and business process outsourcing specialist with over 15 years experience in building and running highly efficient sales and customer support organizations, and in providing board and project level consulting to the sales and service organizations of leading companies all over the globe. Developed and implemented staffing strategies and programs that improved operational.
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