Oct 09

Today’s small to medium-sized businesses are continually seeking ways to reduce overhead expenses while increasing productivity. As a result, outsourcing specific tasks has become a popular solution for freeing up time in order to focus on more critical aspects of the business. Outsourcing the payroll function has become a popular means of doing this with many positive results. 



There are many benefits to outsourcing payroll rather than processing it in-house.

  • Saves Time
    Payroll processing is a substantial time-consuming activity. Each pay period requires the input of data and correction of any errors. The process also requires tracking benefit deductions, paid time off, and attention to changes in federal and state regulations. Additionally, W2s must be prepared and distributed on time to each employee. Even once the payroll data has been entered, checks must be printed, signed, and distributed. By outsourcing this function, employers will realize substantially more time to focus on other tasks within the business. Employers will only need to approve records with the outsourced specialist for each pay period rather than dealing with these repetitive activities.
  • Cost Efficiency
    Small and medium-sized businesses may not find it economically feasible to support a payroll department in-house, especially if they are operating the company with less than 30 employees. Payroll employees calling in sick, resigning, or needing vacation or maternity leave time, can overburden the department. New or temporary staff to replace them would have to take time to understand the payroll system which could result in excessive delays. Internal payroll processing also requires implementing and maintaining expensive computer hardware and software programs. Should the payroll platform experience failures, this would be another unexpected cost to resolve.
  • Avoidance of Tax Errors and Penalties
    Business owners often find it difficult to keep abreast of constantly changing government tax laws. This can result in unintentional omissions and errors in payroll taxes leading to costly penalties and audits. By using a professional payroll provider, you can be assured that all regulations are being closely followed with considerably fewer opportunities for errors. Additionally, many outsourced payroll specialists can handle tax filing and payment which relieves the business owner of this time-consuming responsibility.
  • Teaming with Experts
    Payroll professionals keep current with Human Resources and payroll regulations which small business owners lack the time to research.  These areas include workers compensation laws, 401K programs, and other benefits and deductions that are included in the payroll system. By teaming up with a staff of qualified experts at outsourced payroll providers, business owners will be free of worries when it comes to the administration of these essential plans. 
  • Data Protection
    Due to the risks involved in payroll processing, enhanced security measures are of critical importance. Embezzlement, file tampering, and identity theft are a constant and real threat to any financial system. The last thing a business owner needs to worry about is having to closely monitor their payroll systems for these intrusions. Most outsourced payroll providers have resources in place that can monitor and alert clients to suspicious activity. These systems also provide the best protection for the storage of confidential data through the use of redundant backup systems and highly secure servers.
  • Real-Time Reports
    Payroll companies often provide access to many real-time reports through systems that harness the latest software and hardware technology. These systems can give business owners access to  invoices and payroll reports, benefits information, and total compensation reports.

In conclusion, processing payroll in-house has many disadvantages that can easily affect the bottom line of the business. By outsourcing this function, the business owner can be confident that payroll will be met without costly delays. Contact us for more information on how our payroll services can help improve your productivity and profitability. 


About the Author

My name is Rebecca Howell, EA and owner of Custom Bookkeeping & Accounting Solutions, LLC. I started my business in 2003 after working for a local CPA firm in Scottdale, AZ. I have continued to stay an Advanced QuickBooks Proadvisor along with acquiring my Enrolled Agent license with IRS in 2013. I am a wife and a dog mom to two beautiful rescues that bring extreme love and joy into our home. My family and I recently moved from Arizona to Washington and started a new chapter in our lives.