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Should I Outsource My Payroll

By: Kristine Overacker

There are many benefits to outsourcing payroll, but is it right for your business? If you have more administrative tasks than resources, or need expertise in the area of payroll management, outsourcing to an industry professional may be a good option. However, outsourcing payroll is not one size fits all and there are times when it may be best to keep things in house.

 Why Outsource Your Payroll?

Save Time - Employers have a never-ending list of tasks to keep their business running. Regardless of the number of employees a business has, payroll takes time. By outsourcing payroll, business owners can hand off calculating wages and withholdings, scheduling tax payments, filling payroll tax returns, reporting new hires, benefits administration, and many other payroll related tasks to trained industry professionals.

Integrate Payroll and Minimize Errors - Payroll provider’s systems can be integrated with timekeeping, benefits administration, Federal, State, and local agencies for reporting and transmitting payments. Many errors due to data entry can be reduced or eliminated by integrating and automating payroll.

Ensure Compliance - In today’s fast-paced world payroll laws and regulations change quickly. Outsourcing your payroll to an industry professional gives you peace of mind knowing they are on top of changes and will make you aware of any that affect your business.

Improve Security - Cyber-attacks are one of the greatest threats to today’s businesses. Maintaining secure employee data on company computers is a recipe for disaster. When choosing to outsource payroll, choose a provider that offers state-of-the-art technology to keep your employee’s data safe.

Go Paperless - Direct Deposit is available through most if not all payroll providers. In addition, many payroll providers offer online employee portals for the employees to access their paystubs and W-2’s or make changes to their W-4 via the Internet on their computer or via a mobile app. You will never again need to reprint pay stubs or replace uncashed checks when your company takes advantage of direct deposit and employee portals.

Reduce Fines and Penalties - Outsourcing your payroll will be an additional expense for your business, but the cost of outsourcing payroll may be significantly less than the fines and penalties caused by mistakes.


When Should You Not Outsource Your Payroll?

No Employees – If your business has no employees, you don’t need payroll. If you are a sole proprietor and have no help, you don’t need to outsource your payroll.

Timing – If your business cuts payroll checks on the same day your pay period ends, outsourcing may not be best for you. Typically, payroll companies need your information at least two business days prior to the deposit date. This gives them time to process payroll, have it sent to your bank for direct deposit or get you the checks.

Cash Flow – An important consideration when deciding if you should outsource your payroll is cash flow. If your bank account holds just enough to stay out of the red, adding more expenses may not be helpful. Over-drafting your bank account or worse, your employees not being paid on time could cost you both money and employees.


If you decide to outsource your payroll, read How Do I Select a Payroll Provider to help you make the right choice for your business.