Why Outsource Payroll Processing?

After spending some time in business, you may be asking yourself: Why outsource payroll processing? The process is usually an exact same routine, it has to be on time, and there’s very little variation. As a business owner, you only need to see the bottom line, so isn’t this the perfect set of characteristics for a task to be delegated?

For small businesses, payroll processing is one of the first essential business requirements that gets outsourced to a professional. Doing this will limit mistakes, give you more time, and take a fairly undesirable task off of your plate. Especially with taxes continually becoming more complicated, it’s as good of a time as any to outsource your payroll processing to professionals.

What is Payroll Processing?

Payroll processing involves everything from onboarding a new employee into your system to making sure your employees get paid at the end of every payroll period. This process is vitally important because your employees depend on receiving a regular paycheck. Late or inconsistent payroll processing is the quickest way for your employees to be dissatisfied with management.

The stakes are high, and you want to ensure that your process is sound and consistent. Payroll processing is a multi-step process that can quickly become tedious for business people who don’t specialize in human resources. There are many additional reasons you should outsource payroll processing.

Outsourcing is a Huge Return on Investment

There is an incalculable number of business tasks that are essential and require very different specializations from professionals. This is why so many business leaders need to be very dynamic and experienced in many business areas. Being an entrepreneur is a jack of all trades career, not a hyper-specialized career.

Many companies build their entire business model off of handling outsourced essential business functions for companies. This hand-off is possible and efficient because one company can be profitable by managing the payroll of a hundred other businesses. As a result, they retain expert status in the field, and they can process payroll more efficiently than any business could on their own for a lower cost.

Professional employer organizations (PEOs) are one of the best examples of these major business organizations. By outsourcing essential business processes, such as payroll processing, a PEO can offer these services as packages to businesses, generating a significant return on investment (ROI). For example, a recent study found that PEOs generate an average ROI of 27.2% in monetary savings alone for businesses that outsourced their HR services. Payroll processing is one of the first services outsourced by a business and contributes significantly to this figure.

It’s Cost-Effective

Outsourcing HR services is cost-effective due to the return on investment provided. Processing payroll usually requires certain expenses, such as software. In addition, you have to be trained on using it and understand the current laws and regulations concerning payroll reporting. Payroll processing isn’t just a routine task; it’s also the time that must be invested to learn how to do it.

Payroll processing is most difficult for businesses with high turnover rates, employees working different hours each week, or employees working from other states. These factors increase the complexity of payroll processing and make it more difficult for a business to process payroll in-house. Especially in these scenarios, outsourcing payroll is going to be very cost-effective.

You Can Focus on Other Tasks

One of the primary reasons business owners outsource their payroll processing is because it frees up time. Whether you’re doing it yourself or tasking a general manager to process payroll, it takes up a significant amount of time at the end of each payroll cycle. Payroll processing has a very high opportunity cost, which is why your business can benefit significantly from outsourcing it. If payroll is being processed in-house, it requires at least a managerial employee to complete the task, which means the employee could likely be doing something more productive with their time.

Make Payroll Tax Obligations a Breeze

One of the major advantages of outsourcing payroll processing is that your provider includes or can add payroll tax services at a low cost. The IRS and most states require employers to file a quarterly report on wages and numerous other taxes that get deducted from employee payroll. Most employees only have to worry about filing taxes once a year, but for businesses, quarterly taxes seem to begin as soon as the last quarter ends.

Taxes require a lot of attention, and filing incorrectly can have substantial consequences for your business. Instead of worrying about payroll taxes every quarter, outsourcing will give you a lot of additional return on your investment.