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Payroll is a key driver of your business, so it’s important to get it right. Organizations with proper payroll processes in place are free to thrive, while companies with flawed payroll systems can be susceptible to significant legal risks, fines, and employee relations issues.

However, payroll and regulations are extremely complex. With payroll rules and regulations constantly changing, it’s almost impossible for the average business to keep up.

There are upwards of 10,000 federal, state, and local tax regulations that affect the way employers process payroll. And failing to follow these properly can result in large fines from the IRS. According to the IRS, more than 1.8 million tax returns were audited in 2016 for businesses with income between $200,000 and $1 million. In 2016, 978,564 businesses of all sizes were assessed civil penalties.

Growing businesses want to avoid these potential risks but find it nearly impossible to keep up with the wide range of laws pertaining to employment. This is why more and more businesses are turning to outsourced payroll companies to bridge this gap in expertise. Recent research by Robert Half indicates that 39% of U.S. companies outsource payroll services. 

Outsourcing Payroll: Three Reasons Why Businesses Should

  • Save time (time that can then be used to focus on growing your business) 
  • Gain access to the technology and expertise to perform payroll (management services) well
  • Reduce costs and risks associated with failing to follow tax and employment regulations

Ultimately, as your business evolves and grows, your team will become larger and your payroll (management processes) will become increasingly complex. As an employer, you’re expected to understand all hour, wage, and employment laws. Mistakes in these key areas can lead to audits and penalties, something a growing business simply doesn’t need.

For many growing businesses, outsourcing payroll prevents a good opportunity to streamline operations and reduce risk. However, each company must decide if (the benefits of outsourcing payroll) is right for them. We put together this ultimate guide to help you explore the pros and cons of outsourcing payroll, so you can make an informed decision about how to handle your business’s payroll.

This Outsourcing Payroll Guide Will Teach You:

  • Advantages of outsourcing payroll  
  • Disadvantages of outsourcing payroll 
  • What to look for in  payroll outsourcing companies
  • Why leverage a payroll provider’s HRIS 
  • Questions to ask a potential payroll outsourcing provider

Benefits of Outsourcing Payroll

Time Savings

Payroll is a time-consuming process. From keeping track of benefits deductions, wage garnishments, new hires, terminations, PTO, and state and federal regulations can be challenging. Outsourcing payroll allows you and your team to focus on core business functions that drive revenue and help you grow.

Reduced Risk

Penalties for errors, omissions, or late payroll tax filings can be very costly. The IRS estimates that 40% of small businesses pay annual penalties for incorrect filings. Beyond tax risks, your organization must also comply with all state and federal wage and employment laws. Failure to comply with these laws can lead to audits and fines. However, working with a payroll outsourcing provider can ensure that your business has all compliance bases covered. This will give you the peace of mind knowing your business won’t be susceptible to these risks and fines.

Access to Experts

As your business continues to grow, you’ll have to comply with more and more state and federal regulations. Have a team of HR and compliance experts by your side to help you navigate these complex changes can be invaluable for your organization.

Data Security

Payroll outsourcing services use secure online portals to store and protect your employees’ sensitive information.

Reduced Payroll Costs

For many small-to-mid-sized businesses, completing payroll in-house can be a money burner. Of course, actual cost is company-specific, but you can calculate how much time your team currently spends calculating payroll, preparing w-2’s, onboarding new-hires, producing reports for accounting, etc. Paying a salaried team member (or doing it yourself) can end up costing your organization a lot more than working with a payroll outsourcing company. For most growing businesses, working with a payroll outsourcing provider is a cost-effective option.

Disadvantages of Outsourcing Payroll

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