If you’re considering switching from Do-it-Yourself (DIY) payroll to an outsourced provider, it’s natural to have some concerns about this new approach for your company – especially because there are a lot of misconceptions around complete payroll services on the market.
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Many companies worry about transitioning from in-house payroll because of things they read or hear about outsourced payroll. To help you make an informed decision, here we’ll debunk several outsourced payroll myths, including:
After reading this article, you’ll know the facts about using an outsourced provider so you can make the right decision about outsourcing for your company. For more guidance about understanding the scope of payroll services—and how they align with your organization’s needs, consider downloading our complete guide to payroll solutions.
As you research outsourcing payroll, you’ll likely find several misconceptions. Here are the six most common.
One of the biggest barriers to companies shifting to outsourced payroll services is the concern over the cost. But it may be more affordable than you think. Generally, you can expect to pay about $200-$250 per employee per year for basic payroll outsourcing. Compare this to the median salary to hire a payroll coordinator at your company, which is $44,020.
There may also be additional costs with outsourcing depending on what other services you want or need. For example, at Complete Payroll Solutions, we include tax filing and direct deposit in our base price but other companies may charge extra for these services.
Moreover, you may decide you want a more comprehensive approach that also includes integrated time and labor management, so your employees’ hours are automatically uploaded into the payroll system. Usually, these extra solutions have a separate fee that you’ll pay in addition to your payroll processing costs. However, most vendors offer bundled packages that include several core services that cost less than purchasing them a la carte.
To eliminate any surprises and find a solution that works with your budget, when you’re talking to vendors, be sure to ask what is and isn’t included in the price quote.
If you’re a small company, you may think it’s not worth it to outsource to a complete payroll service. But it’s important to understand how much time you’re currently spending on payroll when doing it yourself. Typically, small business owners spend about 5 hours each pay period processing payroll.
That’s because, even if you just have a few employees, there are lots of steps required. You’ll need to calculate gross pay, including overtime; account for deductions and exemptions for payroll taxes and benefit contributions; follow state law regarding direct deposit and paystubs; report to the IRS how much money you withheld each quarter; and more. Not only that, getting all these pieces correct is critical or you risk potential penalties.
Rather than worrying and spending time on these administrative tasks, it makes sense for many companies to outsource payroll services so they can focus instead on more strategic activities that can grow the business.
Many companies believe the only time they can switch to a payroll service provider is at the start of a new year. But that’s not the case. While it may be easier to start with a vendor for the first payroll in January, you can switch anytime. There will just be an extra step involved: you’ll need to provide the vendor all your payroll history for the current calendar year by employee.
Fortunately, the payroll vendor will help you with transmitting this data. In most instances, they’ll provide you with a template so you know exactly what information will be needed and when. As you evaluate vendors, ask if you’ll be assigned an implementation team to answer any of your questions as you get set up with the third-party provider and make sure the transition is seamless.
You may think using an outsourced payroll provider will require too much effort from you. However, the vendor’s job is to make things easier. In fact, it should be much less complex to have someone else process your payroll than to do it yourself.
That’s because using manual, paper-based methods or even a software to run your own payroll is time-consuming, and it takes ongoing effort to stay abreast of laws such as the FLSA and state and local labor requirements regarding employee pay.
An outsourced provider, on the other hand, takes care of all the daily, weekly, and monthly tasks involved with paying your employees, alleviating your burden. With Complete Payroll Solutions, for example, you’ll spend less than 15 minutes each pay period if you have a small company – so you can focus on your core business and revenue-generating functions instead.
Whether you’re thinking about outsourcing payroll or any other business function, you may worry that you’ll lose control. It’s important to note, however, that your payroll vendor is your partner. They’ll structure your payroll to give you as much visibility and input into the process as you’d like.
For example, if you’re worried about giving up too much control, you may want to phone or fax in your payroll each pay period. Or you may want to stick with paper checks rather than switch to direct deposit or pay cards. Or you may want custom reports, so you can track exactly the detailed information you desire each pay period.
Either way, payroll vendors understand that companies have different levels of comfort with outsourcing and will customize a process that works for you.
Sharing sensitive employee data can be scary. And that can make many companies pause when it comes to outsourcing payroll. But it’s important to understand that running payroll in-house has its own set of risks and can oftentimes be less secure.
For example, if you hand off the responsibility to someone else in your organization and there are inadequate controls in place, they could leak salary data or even commit fraud. In addition, phishing attacks are common in payroll departments. In these situations, your in-house payroll staff may receive a scam email that appears to be from a manager in the company and asks for a payment to be made to an employee or asks for data from a Form W-2.
Outsourcing can help mitigate these risks. At Complete Payroll Solutions, for instance, all employees undergo data privacy and internet security training, we restrict your information to only authorized personnel, and all our facilities are fully secure.
And while sharing payroll data externally may also be concerning, especially in light of a highly-publicized security breach at ADP, you can ease your mind by partnering with a secure vendor who has protections in place to prevent the leak of sensitive information. For example, we employ firewalls, DNS filtering, and anti-phishing, spam, and virus prevention technology, among others, and undergo yearly audits on our security.
As you can see, many of the concerns over outsourcing payroll aren’t necessarily things to worry about after all. And after balancing these misconceptions against all the advantages of outsourcing payroll like greater accuracy, time savings, and reduced exposure to fines, 38% of all businesses choose to partner with a payroll provider.
If you decide outsourcing is the right approach for your business, read our next article on the top considerations when selecting a payroll provider. If you want to learn more about Complete Payroll Solutions’ payroll services, visit our dedicated payroll page.