It’s challenging to stay on top of changing legislation and taxation rules. With the right payroll outsourcing provider, you can maintain high levels of security and privacy, while helping your organization manage changing requirements and reduce risk. In 2024, a wide selection of “payroll outsourcing providers” are to be found both domestically and internationally. While different companies will have different criteria for evaluating a good match, they all must ensure a provider maintains adequate protections for employee data and complies with relevant regulations.
- There’s no guarantee outsourcing will be cost-effective, but many companies choosing to outsource find it cheaper overall than keeping payroll management fully in-house.
- We at the MarketWatch Guides team have prepared this guide to walk you through how to evaluate and select the best HR outsourcing service for your business.
- The cost of HR outsourcing can vary widely depending on several factors, including business size, needs and location.
Tailoring payroll services to meet specific business needs often incurs additional fees. Customization can drive up costs, but it ensures that the payroll system aligns perfectly with the company’s requirements. Before you choose a payroll outsourcing provider, make sure you know exactly what you’re looking for. If your staff is all based locally, and you only need outsourcing for this one process, you may want to look at local or regional accounting firms.
Finance and Accounting Outsourcing: How Businesses Can Benefit From Outsourcing Accounting Services
In startups, the resources may simply not be there to hire an in-house professional. For a company hiring international remote workers, payroll outsourcing can reduce the need for legal counsel or consultants on international labor regulations. Although most basic packages cover tax assistance, many payroll companies will charge extra for end-of-the-year processing to get ready for tax season.
However, internships can provide your company with valuable work from students interested in your field. Setting up an internship program can allow you to altruistically contribute to the budding careers of young professionals while also getting work completed at a lower cost. If your business is located near a college, university, or trade school, a nearby internship coordinator will likely jump at the chance to put your company on their roster of potential internship providers. If your payroll company mails paper checks to your business, you may incur additional fees for printing and delivery. Even if you get free standard delivery, additional charges for expedited or out of state deliveries may apply.
Security
This has historically been one of the main incentives for any kind of outsourcing, and payroll functions are no exception. The process of managing employee payroll is often time-consuming—unless, that is, another company is hired to take care of it instead. Payroll outsourcing can lead to big cost savings and provide access to payroll management experts, but doing so also comes with unique challenges and risks. Our 2024 guide takes you through the ins and outs of how payroll outsourcing works and how your company can best evaluate a possible outsourcing strategy.
Benefits of Outsourcing Payroll Processing
Only 17% of US businesses outsource payroll—it’s common to not know when to make the switch. When you outsource payroll for your organization, professionally trained experts will partner with you to handle part of the payroll process on your behalf. Companies experienced in arranging outsourcing contracts with third-party entities can rely on past experience for guidance. For companies newer to outsourcing, however, it’s worth taking plenty of time to select the right provider and to make sure all other aspects of an arrangement check out.
What Is Outsourcing?
If your company pays weekly or biweekly, you could incur additional costs compared to a business that pays monthly (since you’d pay for a service that occurs 4+ times a month instead of just once). Of course, while reducing the frequency of payroll benefits the employer, changing pay frequency often negatively impacts employees. Many workers count on getting their paychecks on a predictable schedule.
Its strong focus on employee insights and analytics makes it a powerful tool for strategic HR management.
If you make this switch, you should give your team plenty of advance warning so they can plan their finances accordingly. Paychex provides solutions for self-employed business owners to pay themselves a salary while also saving for retirement. Organizations should look for a payroll provider that combines deep functional expertise with innovative technology to provide complete visibility into your payroll data and reporting. amended tax return That provider should also share best practices and guidance tailored to your needs and goals. It might seem a little counter-intuitive, but placing your payroll in the hands of a remote party can actually enhance security for your operation. To take communications as an example, advances in remote encryption and cybersecurity have made using a cloud PBX system more secure than a conventional telephone system.
Choose the right payroll service
At the end of the day, the company is still responsible for properly compensating its employees, and problems created or left unresolved by the provider will continue to cost time and money until they’re addressed. The client company also remains liable for tax remittance whether or not it has outsourced this particular payroll function, meaning it’s on the hook for any errors even if it’s not immediately responsible. While payroll outsourcing can help ensure that compliance with local regulations is met, the responsibility for compliance still falls on the employer, not the payroll processor.
When should you consider outsourcing payroll?
They should be able to offer you a project proposal that caters to the size of your company and your price point. From this initial contact, you will also be able to gauge their level of knowledge about your industry, state and federal tax laws, and the like. That said, several things can determine the basic cost of outsourcing your payroll. The concept of payroll outsourcing itself is closely related to the concept of payroll offshoring. The OECD infographic below breaks down the relationship between the two concepts.
If you outsource your payroll, note the existence of such fees before choosing a company. An outsourced payroll services provider calculates the total hours worked (including overtime, sick days, etc) for each employee. They then make deductions for tax payments and any employee benefits contributions. The only types of businesses that identify payroll management as a core function are, well, the payroll outsourcing providers themselves. Outsourcing payroll stands to greatly reduce a major administrative distraction for most companies, allowing them to “cut the fat” from their employee rosters and keep their organizations focused on other tasks.
