Stephen Covey has sold over 25 million copies of his influential “The Seven Habits of Highly Effective People”. His advice to “keep the main thing the main thing” is certainly pertinent if you are considering outsourcing your payroll administration. If your business is about amazing customer service or efficient operations don’t be distracted trying to do payroll administration.
Outsourcing payroll has several advantages. Read on for 7 reasons why you should outsource payroll, and learn some tips for choosing an outsourced payroll company.
Ever since businesses existed they have outsourced some operations. It’s called a “make or buy” decision in manufacturing. They often ask if it is more economical to make a component or to buy it?
With payroll services, it’s very often more economical to buy the service than to set up and run a payroll operation. This is especially true of smaller businesses. The payroll provider manages the administration and compliance aspects of paying your employees in return for a fee.
1. Control Costs
A payroll service provider can deliver these services more economically than your business can. This is because they are delivering payroll services for large numbers of other businesses. The economies of scale mean they can provide you with a cost-effective service using the latest technology and expertise.
Maintaining an in-house payroll function is expensive. You need to recruit and retain quality payroll people. You have to keep them up to date with the latest developments and regulation.
Consider the cost of retaining these people, providing payroll systems and security for sensitive information. It’s a cost you could well do without.
2. Keep Up to Date
Regulations and expectations are constantly changing. Keeping up to date with federal and state compliance is no mean feat. Maternity, sick pay, medical insurance, and tax are among the regulations that might vary from state to state and from time to time.
Keeping up to date is much easier to achieve with an outsourced payroll service. The payroll service provider will inform you about any action you need to take. They’ll also handle the change in administration and reporting.
3. Get it Right
What are the consequences of getting payroll wrong? Unhappy employees may be the least of your problems.
Ignorance of the law is no defense in the case of failure to comply with state or federal law. Litigation is expensive and time-consuming. Get it right by working with experts.
4. W-2 Reporting
Statutory reporting can be a burden for any small business. The process is not always simple or straightforward. An outsourced provider has the experience and expertise to get it right
5. Focus on Your Business
Being successful in business is tough. Competition, customer expectations and controlling your costs at the same time can be stressful. Reducing the burden of non-core activities makes success more sustainable.
6. Data Protection
A major threat to in-house payroll operations is maintaining data protection. Hackers, viruses and disgruntled employees can all damage your business but stealing or damaging your data. Outsourcing payroll can improve your data protection.
7. Risk Management
Many small businesses do try to manage their own payroll without the assistance of a payroll service provider. Imagine the scenario if they lose a key employee at a critical time. Maintaining resilience is not easy if your business is not big enough to support employing back-up staff.
When outsourcing payroll ask what services will be included, how they secure data, and what their rates are. Ask about what reporting they will provide you and your accountant. Ask to speak to other clients and ask them about the quality of service they receive.
Talk more about outsourced payroll services here.