Why Should I Outsource Payroll? A Payroll Processing Company Explains
Teresa Ray, Owner and President of The Payroll Department, Inc, answers your questions about the advantages of outsourcing payroll.
Isn’t it more expensive to pay someone else to do my payroll tasks?
It is certainly NOT more expensive to hire out your payroll processing. When you consider the cost of an employee’s wages and add in benefits that can really add up quickly. If you are the owner of a very small company and you are trying to do payroll yourself, the cost of your time is even greater.
If you outsource your payroll you also don’t have to worry about your payroll processing company calling in sick or wanting to take a vacation OR wanting to request a possible maternity leave that you have to pay for. There’s also the matter of confidentiality when it comes to payroll. If an employee wants to “share” how much a fellow employee is making that can cause extreme drama in the workplace.
What can a payroll service do that I can’t do myself?
You can do everything that a payroll service does but there’s a reason they do it as a profession. Changes in payroll are happening ALL the time like never before in the history of payroll. You, as a business owner, have to devote the time to keep up on the changes in addition to processing payroll, paying the payroll taxes timely, filing all of the payroll tax reports timely and processing W-2’s at year end. Wouldn’t your time be better spent on growing your business?
How secure is the information?
Payroll information should be extremely secure and that question should be asked when interviewing a payroll processing company. Asking if the company is paperless would be another great question. It’s much better not to have documents lying around with confidential information on them such as social security numbers.
How do I know that the service is doing things right? What if they make a mistake?
You don’t know if the service is doing things correctly but a huge red flag would be when you start receiving notices from any of the different federal or state government agencies.
The payroll forms throughout the year are like “quizzes” and the “final exam” is the W-2. W-2s MUST add up exactly with all of the forms submitted throughout the year or they will be rejected. If the payroll service makes a mistake they should be willing to correct it BUT ultimately the business owner is responsible. You must still have knowledge of how payroll processing works and the laws relating to payroll, and you must monitor your payroll service provider.
What questions should I ask a payroll service I’m considering?
- How long have you been in business?
- How do I know you are paying all payroll taxes?
- How much of the responsibility of payroll processing do you do?
- How secure is the information?
- Can I call and talk to a real person without going into a queue for several minutes?
- If there are corrections on the payroll, how long will it take to make the correction?
- What are your fees for processing payroll?
Give me three reasons why I should outsource my payroll.
- Time!! First and foremost it takes time to keep up with all of the federal changes and that doesn’t include the state payroll tax requirements and changes. For example, Ohio is one of the most difficult states to prepare payroll for. Ohio not only has the state withholding tax but it can also have city tax, school district tax, and municipal tax. All of these are based on the employee’s address so it takes time to research every employee. Every state is different and has different requirements. Every employer must be compliant or there can be stiff penalties involved.
- Money!! The cost to outsource to a service should not even come close to the cost of an employee.
- Accuracy!! If the employer has done their homework on researching a good payroll service, then they should have peace of mind in knowing that their payroll is being done accurately so they can avoid penalties and interest being assessed on their payroll.
Should I use an online service or a “real live person”?
Online services provide the software for the employer to process payroll but the employer must still be up to date with all of the changes. They have to take the time to learn the process of the online service and, if there’s a problem, payroll requires immediate corrections in order to keep the employee satisfied.
Calling a toll free number would not be attractive to most business owners. A “real live person” (bookkeeper, accountant, or CPA) that you can know by name and feel comfortable with is a much better option. You should have confidence in your payroll service provider to process and take the entire process of payroll off of your desk. Do what you do best and outsource the rest!