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Reasons Payroll Processing Outsourcing Makes Sense in 2024

July 1, 2024 Kevin Kenealy Payroll Processing Outsourcing Comments Off on Reasons Payroll Processing Outsourcing Makes Sense in 2024
Reasons Payroll Processing Outsourcing Makes Sense in 2024

Running a successful business today requires focus. Focus on customers, employees, systems, and growth.

Payroll processing is a complex, time-consuming task that takes business owners’ attention away from their core goals. In today’s world, outsourcing payroll just makes practical and financial sense.

Payroll Processing Is More Than Just Paying Employees

Payroll seems simple on the surface. You have employees, you pay them. But modern payroll involves much more. Payroll teams oversee:

  • Payroll processing
  • Direct deposits
  • Tax payments (FICA, FICO, state, federal)
  • Tax reporting
  • Time tracking
  • Payroll reports
  • Retirement accounts (401ks)
  • Workers compensation
  • Unemployment claims
  • Vacation/PTO tracking

That’s a huge list of critical tasks. It’s work that requires focus, organization, and accuracy. Work that takes time away from core business goals like serving customers and growing the business.

Calculating The True Cost of DIY Payroll

To determine if outsourcing payroll makes sense, first calculate how much time is spent on payroll tasks.

  • Tally time spent each week or month.
  • Multiply for the year.
  • Compare that total time to time spent building your business.

This reveals the true cost of doing payroll yourself. The time expenditure means less time growing your business. Studies show businesses spend 3+ weeks a year just handling federal payroll taxes. Tack on all the other payroll tasks and it’s easy to see why DIY payroll has a major opportunity cost.

Signs It’s Time To Outsource Payroll

Here are key signals that your business is ready to outsource payroll:

  • Payroll is taking too much time away from higher priorities.
  • Your business and employee count is growing. Payroll workload is ballooning.
  • Payroll mistakes resulting in costly IRS penalties are increasing.
  • Payroll dominates your time, limiting critical time to manage and grow the business.

If this sounds familiar, outsourcing payroll makes sense. The monthly fees, while not cheap, are affordable for most businesses. And they unlock valuable time and energy to focus where it matters most.

Outsourcing Payroll Helps You Focus on Growth

Handling payroll in house increasingly hampers growing businesses. Outsourcing solves several key problems:

It Saves Time

Payroll processing companies handle the long list of payroll tasks for you. This time saving lets you focus on customers, systems, and business growth.

It Reduces Costly Mistakes

Payroll professionals handle complex payroll tasks daily. They know how to avoid mistakes that lead to IRS fines and penalties. Their expertise saves you money.

It Allows Focus on the Core Business

You started your business to fulfill a vision and meet customer needs. Payroll processing is a distraction from that mission. Outsourcing it allows you to keep your vision front and center.

It Provides Access to Expertise

Payroll regulations and tax codes evolve constantly. Keeping up with changes requires dedicating limited time or hiring expert staff. Outsourcing provides ongoing access to that expertise.

Making the Switch to Outsourcing

If outsourcing makes sense for your business, here are tips for making a smooth transition:

  • Research multiple providers to find the best fit. Compare services, reviews, security, support, and costs.
  • Develop a transition timeline to avoid payroll disruptions. Get payroll data to new provider in a timely manner.
  • Communicate changes to employees so they know when and how paychecks will be handled going forward.
  • Validate first few pay periods to ensure accuracy. Then spot check periodically.
  • Review service level agreements and contracts closely. Understand outsourcing arrangement completely.

Outsource Today!

Payroll processing is a complex thicket of tax codes, regulations, calculations, and reporting. It’s time consuming but mandatory. Like bookkeeping or HR, it’s important but not central to most business’s mission and growth.

Outsourcing these functions just makes practical sense. It saves money. It reduces mistakes. Most importantly, it allows attention and energy to be focused on core business goals.

For most businesses today, handling payroll in house just doesn’t make sense. The benefits of outsourcing it to experts are too compelling.


Why Outsourcing Payroll Processing is a Smart Move for Your Business

April 6, 2019 Kevin Kenealy payroll processing Comments Off on Why Outsourcing Payroll Processing is a Smart Move for Your Business , ,

Businesses are required to complete and meet obligations to employees. Payroll problems are difficult for today’s high-tech business world. A business’s payroll division oversees multiple components of employee compensation. It manages payroll processing, direct deposits to employee’s bank account, FICA, FICO, State Income tax payments to government entities including the State and the Federal Government, reporting requirements, time and attendance tracking, company payroll management reports, worker’s compensation, 401k’s plus other types of retirement account reporting, unemployment claims, vacation time-off and more. This is a giant set of tasks to manage for a small business while running the business itself. Putting time into these tasks means a business owner is not focusing on building and managing current business.

What is the Appropriate Amount of Time to Spend on Payroll?

The practical way to answer this inquiry is a business owner needs to calculate the amount of time spent working on payroll each week, every two weeks or month and multiply it out for 52 weeks, 26 weeks or 12 months. After the totals for each segment of time are calculated, a business owner needs to look at the true cost of working on payroll by comparing it to the amount of business not generated related to working on payroll instead of managing and building the business. To make the comparison and analysis useful and valid each payroll task needs to be included in the assessment including managing tax reporting, employee benefits, retirement funds to new name just a few. Several studies over the years indicated in real numbers that business owners spend 3 full weeks a year dealing with federal tax problems. Add all the hours spent dealing with all the other payroll problems and tasks and it becomes readily obvious managing payroll is costly from both a time and business growth perspective. There’s not a fixed number or an empirical study out there that provides when a business owner should hire a payroll processing company, instead of doing it themselves. However, it’s easy to assess if an owner is spending 10 – 20 % of their time working on payroll and all its accompanying issues it’s likely a smart move to hire a company to process payroll to save time and money and then put those savings into managing and building business.

Look at the questions below to determine if it’s time to hire an outside payroll processing company:

  • Is the time spent on payroll exceeding your comfort level?
  • Is your business growing, adding more employees and now is
    payroll becoming a much bigger task than before?
  • Are payroll mishaps become more costly due to tax penalties assessed
    for filing errors charged by the IRS?
  • Is payroll taking up so much time that the critical time needed
    to manage and grow your business is compromised.

From a logical assessment perspective, if the responses to this set of questions happen to be yes, it’s makes good sense to outsource payroll processing. The monthly cost of payroll processing fees, while not nominal, is affordable for most businesses. The benefits of outsourcing payroll processing are time-savings, cost savings generated from reduction in penalties and fines and the improved ability to focus time on and energy towards building and growing your business.


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