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The Advantages of Outsourcing 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:
Saving 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 wining 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.
- Printing and distributing paychecks.
- Calculating and paying withholding and employment taxes.
- Preparing and distributing W-2s and 1099s at year-end.
- Handling employee payroll inquiries.
Saving 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 Paying 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-2's and 1099's — are handled directly by the payroll provider, so they are sent out on time.
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