The Internal Revenue Service (IRS) provides an excellent breakdown of the different types of payroll service provider in the United States. For instance, you can avoid paying for internal HR staff, which can add up with all of the salaries, benefits and trainings. You can also decrease the chances of having to pay monetary penalties for making compliance errors. Zenefits’ pricing starts at $8 per month per employee and goes up to $33 per month per employee.
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. Hiring out the work can, when all goes well, provide significant advantages and cost savings. First-time business owners experience a steep learning curve in all areas, and learning the ins and outs of payroll processing regulations will not generally be on their list of pressing problems to solve.
- You also need to be sure that whoever you outsource to gives sufficient priority to confidentiality, as they’ll be privy to a lot of data.
- Firstly, it provides access to expertise and technology that might be beyond the reach of some businesses, especially smaller ones.
- If payroll processing is outsourced to a PEO, and that PEO is also acting as the co-employer, however, this risk can be mitigated.
- If you make this switch, you should give your team plenty of advance warning so they can plan their finances accordingly.
- For instance, a business with 50 employees would pay a set fee multiplied by 50 for their monthly payroll services.
It is also commonly done by accountancy firms and Professional Employer Organizations (PEOs) (read more about the latter in our guide How does a PEO work?). An accountancy firm with local offices may provide the greatest level of service for a company based in one jurisdiction. For others, a payroll outsourcing provider may be more attractive because they are often able to service employees in many states and countries, and may offer additional options such as full HR outsourcing. For those considering working with a PEO, one that offers payroll outsourcing services only as an option may be a good way to start the relationship before fully committing to all PEO services.
Fixed pricing is a straightforward approach where companies pay a predetermined, flat fee for their payroll services, regardless of frequency or the number of employees. For instance, a business with 50 employees would pay a set fee multiplied by 50 for their monthly payroll services. If you are dissatisfied with the outsourced HR services, first address your concerns with the provider. If the services don’t improve, you may consider changing providers or managing certain HR functions in house.
The additional payroll outsourcing can cost an extra $25 to $75 per employee, as can W-2 printing, mailing, and reporting. Additionally, the complexity of your payroll becomes a consideration here, just as it does with the basic payroll package. If you have employees in multiple states, payroll companies will often slip in extra fees to handle their taxes.
In addition to making direct deposits or sending physical checks, this should also include deducting employee tax payments and employee contributions to benefits packages. The payroll outsourcing provider should be able to process payroll in compliance with local regulations, though the employer is still liable for any breach of compliance. Some PEOs or Employers of Record (EORs) offer payroll outsourcing as a standalone service. If you are hiring internationally and your employees need to be hired by a local company by law, a PEO operating in the area will be able to help with employer of record services as well as payroll processing. Once you’ve found a payroll outsourcing provider, take a look at the contract. Pricing should be explained clearly, most likely calculated with a base service charge and additional charges per employee payroll processed, plus any additional services.
If you anticipate wholly outsourcing more HR and administrative tasks in the future, look for larger Business Process Outsourcing (BPO) providers that also offer the services you will need further down the road. It wasn’t so long ago that outsourced payroll solutions were limited to non-sensitive functions that didn’t involve core business processes or data. If payroll processing is outsourced to a PEO, and that PEO is also acting as the co-employer, however, this risk can be mitigated.
Running a small business is no small feat, and managing payroll and HR support can be a daunting task. As a small business owner, you need to focus on growing your business and keeping your customers happy. That’s why outsourced payroll services and and HR support with a trusted partner can be a game changer. In this article, we’ll explore the benefits of traditional outsourced payroll processing and HR support for small businesses.
Advantages of outsourcing payroll
Finding a high-quality outsourcing solution can make payroll management simpler and decrease the chance of mistakes. Paychex solutions for businesses with 20–49 employees can help owners and managers save time, reduce errors & stay informed of new and changing regulations. A company’s core business functions—whatever it does to generate revenue—are understandably its main priority. Typically, providers report to the client on a regular, predetermined basis, confirming services rendered and detailing performance. For the client, this is an opportunity to ensure everything is going according to plan. The final major component of the process is for outsourced end-of-year tax duties.
What is an outsourced payroll?
This is especially so at a time of great change in the world of work, with employee expectations rising and payroll driving competitive advantage in some organizations. Therefore, taking a new approach with the help of third-party expertise and technology could be a real game-changer for your enterprise. Find out more by discovering the CloudPay approach to global payroll today. They will go on to report regularly on payroll performance so that you can confirm that everything is running as it should and that you are getting value from the outsourcing agreement. With the importance of payroll within businesses growing all the time, many organizations are turning to outsourced payroll services – and it’s easy to see why. Payroll management can be complex, time-consuming, resource-intensive, and expensive.
Loading off extra responsibilities and workload to external service providers is always a good way to remain efficient and productive in the workplace. For example, if a company processes payroll biweekly, they would pay a set fee for each biweekly payroll run. The company should then conscientiously monitor all the additional costs that may add up, such as for auxiliary services and for each new employee that the company might gain in the future. In terms of pricing, Sage HR is affordable for medium-to-large-sized companies that operate across multiple countries.
Cost savings in outsourcing payroll can be significant, even with a small business payroll service. Well, setting up payroll accounts for each employee is a good start, and ensuring they’re paid is a key requirement too. the best 7 free and open source business budgeting software Just as important is keeping the business legal by observing the tax framework of any territories that the business is operating in. Nowadays, it can make sense to contract out the whole activity to an external body.
What to consider before you outsource your payroll
Payroll outsourcing is the use of an external provider to handle the administration of your company’s payroll. Rather than an in-house payroll or HR professional, team manager, or small business owner handling payroll themselves, a third-party company takes care of the logistics. Companies choose to outsource payroll to save time and money, and to prevent payroll errors that could have serious consequences. Reduce risk and save time by relying on a partner to help manage your tax fulfillment needs, including compliance, filing, and administration. Ceridian’s payroll outsourcing experts provide integrated garnishment administration and in-house tax services under a single contract. Finding a trustworthy third-party provider goes a long way, but a company can’t just pass off any payroll mistakes that arise as the fault of its provider and move on.