Operations – Outsourcing Payroll

For many businesses, payroll is one of the most complicated and time-consuming routines completed.  As a solution to this bi-monthly headache, many companies are taking advantage of outside payroll services as opposed to in-house processing.  But is outsourcing the right move for your company?  If the services are chosen properly and set up correctly, they can provide a less expensive, simpler means of paying your employees, filing your taxes and a range of other financial services.  Companies often choose to handle payroll in-house because they consider in-house processing to be more cost-effective than outsourcing, they are protective of wage information, or they want to maintain control over payroll data to handle last minute changes.

In reality, some companies, especially smaller ones with minimal staff and stable payrolls, might be better off handling payroll in-house.  It could certainly be more convenient and efficient if your needs are straightforward, but you are likely to discover that it is not a money saving task – especially when you factor in the time spent managing the process.

Without the proper knowledge of payroll procedure and access to a sound payroll program, it’s easy to make in-house mistakes.  Employees as well as federal, state and local tax collection agencies need to be paid in full and on time.  Finally, using a payroll service can ease your mind.  The Internal Revenue Service has reported that one in every three employers has been charged for a payroll mistake, with total penalties reaching billions of dollars.  And given the ever-changing nature of tax regulations, it’s easy to make an error that can affect your business’s bottom line.

So when is the right time to outsource your payroll?  A payroll service makes sense if your payroll changes with each pay period.  If your company has employees working varying amounts of hours each week, pays commissions or has a significant turnover rate, a payroll service can not only save costs, but time as well.

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