Starting a Small Business

5 Key Factors Why Businesses Decide to Outsource Payroll

5 Key Factors Why Businesses Decide to Outsource Payroll

The decision to outsource payroll isn’t an easy one for any business, but it can provide key advantages for most small to medium-sized businesses. In many ways, businesses can grow faster and achieve goals faster by outsourcing this tedious back-office task. Most companies see the move to outsourced payroll as being one of the best financial decisions they’ve made. But, why? 

#1: It saves companies money

Overhead costs related to payroll are significantly reduced when outsourcing is used. The cost savings come in various forms. For example, businesses no longer have to pay in-house staff to handle payroll. This can significantly reduce labor costs as well as costs related to those employees’ benefits. The total time spent on payroll tasks, such as calculating employee hours, taxes and sick time, as well as the time it takes to generate reports, prepare local, state, and federal taxes, and manage deposits, adds up. 

#2: It saves time

While it saves employees time, it also saves business owners time. Every moment you are not able to work your business, such as aiding customers or working on marketing plans, is a level of loss to your company. A lot of time and attention are generally spent on payroll tasks, even from upper management. That’s costing the business financially.

#3: It’s more accurate 

Having a trained and experienced team handling the payroll process ensures accuracy. There’s more focused effort on providing clear, well-designed reports that answer questions and provide extensive information that businesses can use to achieve many of their goals. This reduces the time spent on tasks but also ensures that every document and detail is accurate within the business’s financial reports.

#4: It ensures data security

A growing number of businesses are facing security breaches. With in-house payroll services, it is the company’s legal requirement to comprehensively protect an employee’s personal information. This often includes providing a high-level of tech protection from cyber thefts and even document theft within the company’s offices. This not only raises the risk of a lawsuit or liability claims if information is lost, but it also raises the costs for employer-related insurance protections such as cyber liability.

#5: It ensures government compliance

Mistakes happen. When an in-house payroll team makes a mistake, the company is liable for all losses. This may include any local, state, or federal fines as well as other costs. With outsourced payroll, if the mistake is due to an error made by the provider, this eliminates the liability risk to the company. A mistake, for example, in relation to overtime payment could lead to thousands of dollars in fines if a review is triggered due to a simple clerical error made by the in-house team.

It's clear that there are numerous benefits related to using outsourced payroll. And, there are very few limitations. The out-of-pocket cost is often lower than the cost savings and revenue boost that companies often see as a result of using these services, making this simply the right decision and a worry-free way to handle payroll.

share this post
Search for matches...
Bret Willoughby

Bret Willoughby

Bret Willoughby is a practicing tax preparer for expats throughout the world. He created Providence Payroll to meet the needs of Churches, not-for-profit organizations and businesses with remote workers. His web-based payroll processing service benefits both employers and remote workers with an easy way to access payroll information. Clergy have unique payroll and tax-related issues, one that Providence Payroll is qualified to manage.

PROVIDENCE PAYROLL SERVICE
2 reviews

Kansas

Recommended Professionals

In the face of economic uncertainty, TaxBuzz is the industry's most up-to-date tax information.

Join 60,000 who get our weekly newsletter. No spam.

We know tax and accounting issues are complicated.

Do you have additional questions on this topic for this author?

Related Posts

Latest Posts