As a business owner, you’re bound to get overwhelmed by payroll tasks which can hinder your ability to run your business. That is the reason why most companies opt for outsourcing. However, is this the best method for you? Here are the top six indicators that you might require outsourcing your payroll to help you determine.
What exactly is outsourcing payroll services?
Let’s start with the basics: What does “outsourcing” even entail? Although many businesses choose to manage the payroll themselves, using or using paper-based, manual methods or software, there are many steps to take to get the payroll process right.
It is possible to outsource payroll services provided by a third-party service that can take care of the majority or none of the compliance and administrative tasks associated with payroll as you’d prefer. For instance, you might need a company to handle your payroll and your tax filings for the quarter. Perhaps you’d like to delegate more work and outsource other tasks too.
Top 6 Signs You May Need Payroll Outsourcing Services
What can you do to determine whether your payroll processes require external help? Here are the most obvious signs you might be in the process of outsourcing.
1.Payroll obligations can detract from the growth of your company.
For many employers, those responsible for managing payroll spend lots of time dealing with the process. That can cause problems if the focus is diverted from the revenue-generating activities. Business owners spend 4 hours and 52 mins processing, filing, and paying the payroll tax every payment period.
One of the benefits of outsourcing the payroll process is that the company will handle every day, weekly and monthly tasks associated with paying your employees and paying taxes, leaving you and your employees to concentrate on your core business tasks instead. When you use Complete Payroll Solutions, a small-sized business will take just 15 to 20 minutes every pay period to manage the payroll.
2. Paper-based, manual procedures are prone to error.
When it comes to managing payroll at home, there are a variety of calculations to be done correctly, including deductions and wages up to tax calculations. It’s not always straightforward.
For instance, although Social Security and Medicare taxes are fixed for employees, income tax rates are based on the amount an employee makes and the details provided by the employee when filling the Form W-4. With the many procedures involved, it’s easy to see that Payroll Services companies themselves can make errors.
There are several steps involved. IRS and SCORE have found that approximately three-quarters of companies commit mistakes in their payroll. The main benefit of outsourcing to a payroll service is that they’ll utilize software online that automatizes tax calculations, withholdings, and filings for better accuracy. They’ll also be accountable for any fines your company may incur due to their errors.
3. You don’t have the resources to manage the software for your payroll.
When you’re using software for your Payroll Services, you’ll need to ensure that you update it so that you’re using the most current tax tables every year. For instance, there was a change in the Social Security wage base limit increased to $147,000 in 2022.
Additionally, your program could offer updated versions that include improvements, fixes, or other enhancements that you’ll need to download. However, keeping track of software updates is time-consuming and could mean spending money.
If you choose to use the outsourcing of Payroll Services offered by the provider, it will update its software without any actions required from you. Therefore, you can be sure that you’re benefitting from the most current advancements to ensure greater efficiency and precision.
4. You don’t have the experience on your own to ensure compliance requirements.
If you handle payroll on your own and are responsible for complying with different state and federal laws regarding wages and hours could be a challenge. For instance, when managing payroll, you must adhere to the frequency of pay minimum wage, overtime, pay methods taxation, payroll, pay stubs, and record-keeping.
Each aspect of payroll comes with the threat of a penalty for non-compliance. If your business is like many others, you lack experience complying with all regulations within your organization.
If you choose to use outsourcing payroll services, the service provider will advise you through legal requirements and help you receive the correct payroll. Additionally, they’re experts on compliance issues, so you don’t have to put in the time and effort to comply with all laws on your own.
5. A negative pay experience can affect the satisfaction of employees.
While one of the benefits of internal payroll processing is having greater control over the data you collect for your payroll, you are at risk of getting the wrong payroll data due to the typical issues we discussed, such as inaccurate calculation.
Incorrect calculations can hurt the morale of employees and their retention. Two payroll errors could cause 49 percent of employees to begin looking for a job. Employers who outsource payroll services will have automated processes that will ensure you pay your employees in a timely and accurate manner.
Furthermore, some payroll companies offer your employees 24/7 access to a self-service website that allows them to look up their pay, download their paystubs and W-2s, and update their details – actions that empower and motivate employees to boost loyalty.
6. Your business requires help with other HR-related tasks.
You may have only some employees now and have pretty basic payroll needs. If you’re beginning to expand, the HR needs of your company will, as well. You may, for instance, require help in the hiring process and onboarding, as well as providing health insurance or retirement plans.
When you decide to outsource, you’ll discover that the payroll providers typically provide the same or less support you need across all aspects of management of your workforce. You can opt to have comprehensive and integrated benefit, HR, payroll, and compliance assistance all in one place with bundle pricing to provide more value.
That is just one of the many benefits of outsourcing your payroll service. To ensure that the service you choose can handle the challenges of expansion in the future and growth, inquire about their other services and how they can scale with you to achieve your goals as your company grows.
How to Choose the Best Time to Use Payroll Outsourcing Services
Although there are some benefits of internal payroll processing, such as ensuring control, having greater flexibility to pay cash wages, and avoiding expenses for vendors, outsourcing is the best option for companies who wish to steer clear of the difficulties of handling payroll independently and ensure that they are accurate every time.