4 Proven Benefits of Outsourcing Payroll

Payroll can be a complex process for businesses. Every business owner recognizes the pressures involved with payroll processing, payroll tax filings, tracking paid time off, and completing and distributing W-2s each year. Over half of companies today outsource their payroll processing to handle these tasks and keep their business on top of a quickly evolving workforce. In addition to a minimized workload, here are the benefits a company will receive when outsourcing payroll.

What Does It Mean to Outsource Your Payroll?

When most people think of payroll, they think of one thing: their paycheck hitting their bank account every couple of weeks or month.

But the process for that to happen has a lot of steps. Employers are responsible for accurately calculating the wages that should be paid to employees, ensuring that appropriate employer and employee taxes are withheld, and much more.

In fact, many tasks are included in the wider payroll process. Here are some of the most important:

Setting up payroll accounts, technologies, and delivery mechanisms
Tracking time worked by employees and calculating wages owed
Monitoring employee sick pay, vacation time, and other paid leave
Withholding and remitting payroll taxes, as well as federal and state income taxes
Ensuring the business remains compliant with all relevant regulations
Managing payroll deductions, such as health insurance or retirement plans
Submitting filings at year-end, as well as when employees are hired or dismissed

As you can see, there’s a lot of work that goes into running payroll. For that reason, many large businesses staff their own internal payroll departments. But for SMBs and even mid-market businesses, that’s often not feasible.

For these types of businesses, outsourcing payroll to a third-party provider can represent a major win.

Four Proven Benefits of Hiring a Payroll Management Company

1. Increased Organization

Proper payroll organization begins with effective systems and processes for managing tasks, responsibilities, and deadlines. This can include software tools for managing various types of information, detailed filing systems—electronic and physical, avoiding clutter, and disposing of out-of-date items. Fulfilling the payroll requirements for Paycheck Protection Program loans also requires a great deal of organization and additional documentation.

For these reasons, handling payroll in-house can be more expensive than outsourcing. A payroll provider has the experience and tools you need to organize all your payroll requirements and potentially lower your costs.

2. Clear Documentation

Having a solid understanding of your payroll process is critical. Clear documentation is important in case there are any questions or concerns from employees or stakeholders. When things change or something goes wrong, having a streamlined and documented process will help maintain stability and prepare you in the event of an audit. Wondering where to start or what should be included in your payroll process? A payroll provider can help you eliminate any guesswork of developing an effective payroll process with clear documentation.

3. Minimized Liability

With payroll, the smallest details can make the biggest difference. Failing to pay close attention to every detail can greatly impact your staff and payroll management. Payroll providers know the ins and outs of every aspect of the job. They can help you minimize liability arising from overtime pay requirements, payroll taxes, and quarterly and annual tax forms. From proper classification of employees to tax regulations and labor laws, outsourcing your payroll ensures you don’t miss important details that keep you in compliance and penalty-free.

4. Improved Scalability

If you are wondering how you will keep up with payroll responsibilities as your business grows, consider outsourcing your payroll. Shifting your payroll responsibilities to a provider can improve your organization’s ability to scale without having to hire additional people to handle payroll. According to the American Payroll Association, payroll is one of the most regulated functions in an organization. Utilizing a payroll provider will give you access to a full team of payroll specialists who keep up with state and local regulations as you expand. Your payroll will be completed on time and with accuracy, efficiency, and effectiveness, allowing you to grow your business.

Reasons You Should Outsource Payroll

Payroll is arguably one of the most essential HR responsibilities for an employer, especially if you ask the employees. But, for companies that may not have a designated payroll professional on staff, the task of payroll processing can be frustrating and time-consuming for the employer to manage. That’s one of the reasons many employers seek to utilize payroll outsourcing and processing services from providers.

Payroll outsourcing and processing services offer several benefits to small businesses and employers. Not only can it save time and energy, but employers can rest assured that payroll outsourcing providers will keep all processes and procedures in compliance with the latest payroll laws and regulations, avoiding any potential penalties. Here are reasons to consider outsourcing payroll for your business.

1. Save Time

One of the primary reasons a company may outsource any service is to save time. Handling payroll is a time-consuming process that takes up valuable time for business owners that could be spent building revenue and connecting with customers instead of calculating and distributing paychecks. An outsourcer can streamline payroll tasks such as calculating payroll each time period, printing and distributing paychecks or pay stubs, program maintenance, training, keeping up with changes in tax rates and laws, and preparing payroll taxes and returns to government agencies. Implementing systems like UKG Ready™ and populating effective reports promote efficiency as well.

2. Save Money

Cost savings is a key priority right now for many businesses, but especially small to medium-size businesses. Some businesses opt to have a full-time payroll specialist on staff, a position that pays an average of around $52,000 per year, per Glassdoor data. Companies of this size may find it more cost-efficient to outsource instead of having a payroll department in house.

Professional payroll providers can also save companies from costly penalties related to tax and compliance. Processing payroll on your own may cost you more in the long run if you or your department fails to keep up with the latest requirements. Something else business owners must keep up with is installing the latest version of their payroll software and recent tax tables. Using the wrong tax tables can result in stiff penalties. Paying a maintenance fee and upgrading software is an ongoing cost that payroll providers can remove.

3. Avoid Penalties

Knowing how to properly manage tax deductions and meet the federally mandated taxes for Social Security and Medicare is one of the leading factors in productive payroll management. A payroll outsourcing company can properly ensure the filing of federal, state, and local tax returns, while also processing payment for all payroll tax liabilities. Employers can also benefit from a payroll outsourcing agency’s on-time responses to tax agency inquiries. You may not be or have an expert to handle the complicated world of government tax regulations. These rules and regulations often change, and it can be difficult for small business owners to keep up with payroll-related legislation changes, especially in today’s world. Business owners are legally responsible for any cases of misrepresentation or a failure to accurately report employment taxes to federal and state government agencies.

4. Enhance Security

One of the greatest concerns for small businesses when it comes to outsourcing payroll and processing is data security. A professional payroll provider will have taken extra precautions to defend against potential data breaches. Employers must take every step to ensure employee data is always kept safe and secure. Knowing that a high level of sensitive data is within their care, payroll providers go the extra mile to keep client information safe and secure from cyber-attacks. Choose a provider that is equipped with the proper tools and tactics to protect sensitive employee data.

5. Ensure Compliance with Tax Obligations

Making the required tax filings is a fundamental part of running payroll. But with tax regulations constantly changing, it can be a challenge for businesses to keep up. The right outsourced payroll provider will prepare and make all required filings on your behalf, ensuring your business meets all its legal obligations.

6. Eliminate Worry

Leveraging a team of experts to handle all your payroll needs has multiple benefits for you and your business. You will have one point of contact, so you won’t have to worry about a call center or team members calling in sick, resigning, or requesting to go on vacation. Your outsourcer will help you prepare, collecting all the information they need in advance, leading to a smooth transition. Reach out to discover the added value, resources, and savings LBMC Employment Partners can provide your company.

LBMC Employment Partners roots in Nashville meaning that they understand our world, healthcare, and the challenges and opportunities that startups may face. They are taking care of the details allowing us to be nimble, and adapt to changing market conditions, while being steady and consistent in our business and human resources practices. Knowing that LBMC Employment Partners’ PEO will consistently focus on delivering information proactively helps us focus on growing our businesses.

Co-founder and chief strategist of a healthcare technology startup in Nashville, TN

LBMC Employment Partners: A top Tennessee Payroll Management Company

As one of the top payroll service providers in Tennessee, LBMC Employment Partners is dedicated to helping employers maintain the highest of standards with payroll management through a variety of payroll solutions. Our team of payroll specialists is equipped and ready to make your life easier with accurate and timely payroll processing, payroll management, and payroll tax services. We stay on top of legislative changes and the complexities of managing remote workers so that you don’t have to.