Why It Pays to Outsource
Your Payroll
There's more to managing
small business payroll than
writing checks and handing
them out to employees on
time. You need to keep
accurate records, calculate
and pay payroll taxes, and
communicate effectively with
employees. Many small
business owners are finding
that they can simplify the
process by using an
outsourced payroll provider
to manage the entire process
cost-effectively and
efficiently.
Outsourcing your payroll can
provide your small business
with a number of important
benefits:
Save time
Using an outsourced payroll
solution is typically more
efficient for a small
business than processing
payroll internally. Leaving
payroll to experts frees up
hours that you can devote to
other important parts of
your business. Whether it is
your time, staff time, or a
combination, chances are the
hours could be better spent
winning more business,
improving customer service,
fine-tuning business
operations or launching a
new product line. Among the
areas where outsourcing will
save time are:
- Processing payroll
- Cutting and
distributing paychecks
- Calculating and
paying withholding and
employment taxes
- Preparing and
distributing W-2s and
1099s at year-end
- Handling employee
payroll inquiries
Save money
Many business owners
underestimate the cost of
processing payroll
internally by failing to
account for all hours spent
and resources allocated to
pay employees and maintain
payroll paperwork. A
thorough cost assessment
usually proves that a small
business saves money by
outsourcing the processing,
tracking and filing of
payroll documents. To assess
your own internal payroll
costs, consider:
- How much the time
spent is actually worth:
consider the cost of
your time and the time
of anyone who processes
or "touches" payroll.
Often, many people in a
small company are
involved in the various
parts of payroll
processing.
- What savings would
outsourcing provide:
since an outside
provider can handle all
the responsibilities
involved in managing
payroll and answering
employee questions, a
small business can often
eliminate or reallocate
an internal payroll
resource.
Avoid penalties
Calculating federal, state,
and local employment taxes
and filing payroll-related
tax paperwork can be more
than just a hassle. If it's
done incorrectly, your small
business may face penalties
and even interest on money
owed since the mistake was
made. In fact, it is
estimated that one in three
small businesses receive a
tax penalty costing over
$800 each year. Outsourcing
payroll does away with the
risk of many of these costs
and hassles because:
- An outsourced
payroll provider
calculates payroll
taxes, based on its
expertise and close
tracking of regulation
changes
- Monthly or quarterly
employment tax reports
are managed by the
payroll service,
ensuring they are
submitted correctly and
on time
- Payroll providers
may assume penalties
that come as a result of
incorrect tax
calculations
- End-of-year
paperwork — such as W-2s
and 1099s — are handled
directly by the payroll
provider, so they are
sent out on time
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