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Particularly for the SMB (Small and Midsize Business) market, outsourcing payroll is often considered a best practice. We have outlined the top 10 advantages of outsourcing payroll.

crm The Benefits of Outsourcing Payroll

  1. Achieve Regulatory Compliance
    Tax laws and employment regulations are constantly changing and keeping up with these updates requires considerable time and attention. According to the US Internal Revenue Service (IRS), 40 percent of small businesses pay an average penalty of $845 per year for late or incorrect tax or regulatory filings. Various European Union and Southeast Asia governments report similar occurrences. Most payroll outsourcing companies provide a tax guarantee that there will be no late fees or penalties and incur the penalty if the guarantee is not met. In many instances, this single benefit cost justifies outsourcing the payroll function.
  2. Reduce Costs
    The total costs related to payroll processing can be greatly reduced by working with a payroll provider who brings significant economies of scale (and expertise) to this human resource function. Industry accepted research demonstrates that a small business of 10 employees will typically spend $2,600 per year in direct labor costs associated with payroll. Outsourcing the same activity can generally be accomplished for one-third to one-half that amount.
  3. Eliminate a Non-Core Competency
    Payroll processing is a headache in the best case and a nightmare in the worst case. Business owners and managers that outsource payroll eliminate a tiresome source of personal frustration.
  4. Facilitate Direct Deposit
    Providing direct deposit for employees is much easier when using an outsourced payroll service. Small and midsize business owners recognize that employees want direct deposit in order to eliminate a needless trip to the bank each payroll period. More importantly for business managers, direct deposit reduces time-consuming and error-prone paper handling and the need to reconcile individual payroll checks every month.
  5. Leverage True Expertise
    Most business managers and corporate controllers do not have time to keep up with constantly changing human resource and payroll regulations, withholding rates, and government forms. By outsourcing payroll, a small business can tap into expertise that is often otherwise only available to large companies.
  6. Reduce Lapses Associated with Employee Turnover
    If your payroll manager or corporate controller moves on to a new job, they walk out the door with their first hand knowledge of the payroll process and its many individual exceptions for your company and your staff. Using an outside service reduces that knowledge loss and business risk.
  7. Eliminate Technology Guesswork
    A constant question for the in-house payroll resource is whether they have the latest software version of their payroll application and the most recent tax tables installed on their computer. Using out of date tax tables can result in stiff penalties. Outsourcing payroll removes these software technology headaches.
  8. Free Your Time For Higher Value Activities
    Processing payroll is a time-consuming process that never ends. Payroll management is more than just cutting checks each pay cycle - it also includes properly calculating net pay amounts, applying special tax considerations to commissions or bonuses, preparing quarterly and annual compliance forms, filing W2's and handling the many and varied employee requests. Most SMB companies underestimate the total time they devote to payroll processing. Outsourcing this function can free up staff time to pursue more meaningful value-added and revenue-generating activities.
  9. Tap Into Additional Employee Programs
    When businesses outsource their payroll processing they can easily and affordably tap into other synergistic or complimentary services offered by their outsourced payroll provider. Human resource programs which SMB companies may otherwise not be able to provide on their own include retirement plans, direct deposit and a host of benefits programs.
  10. An Expert To Turn To
    In house payroll resources often perform several other accounting or human resource related activities and are often not payroll experts. With an outsourced payroll service, business owners have a team of dedicated, expert resources to call upon for payroll problems, issues or planning.

On Demand HR Systems  

HR Software Best Practices

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Outsourced Payroll Benefits
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Regulatory compliance

Reduced operating costs
Focus on core competencies
Offer direct deposit
Reallocate scarce time
Offer new HR programs


hr Tags:
human resource best practices, hr applications, payroll best practices, hr software recommendations, outsourced payroll, hr business processes, employee programs, on-demand hr, saas hr, hr management, hris, hr roi










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