Posted by Shivali Anand
October 27, 2021 | 4-minute read (690 words)
As your company expands, so does its workforce, and with that comes the burden of payroll management. For legal, financial and ethical reasons, it is critical for organizations to properly handle payroll. While payroll may seem straightforward and simple on the surface, improper payroll management can be devastating, even resulting in fines and penalties for noncompliance with statutory obligations.
Aside from compliance, payroll preparation is also time-consuming and prone to human mistakes. According to a 2017 survey, payroll takes up more time than any other HR responsibility. An HR professional spends an average of 11 hours per week on payroll, which is time that could be used more productively elsewhere.
Payroll taxes are also the most financially crippling federal taxes for small businesses, according to the National Small Business Association’s 2018 Small Business Taxation Survey.
To save time and money, small- and medium-sized business owners can outsource payroll to a specialized consultant. After sharing employees' information, wages and other pertinent data, the payroll expert takes over. Pay, tax rules, wage laws and everything else relating to business payroll administration are handled by an expert with in-depth knowledge.
We’ve distilled six compelling reasons to outsource payroll to a trustworthy professional.
Managing payroll in-house takes significant effort and attention to detail. That time could be better spent on tasks that will help build your business. Devote your newfound time to enhancing process efficiency and refining sales and marketing tactics, for instance.
Also, automating tasks such as making direct deposits and clocking attendance frees you up from repetitive administrative work.
- Time savings
Money saved is money earned. According to a study from the Electronic Transactions Association, small company owners value their time at $170 per hour because their responsibilities are so far-ranging, spanning daily operations, getting new clients, obtaining financing and so on. In businesses where the owner invests their time in payroll, this alone equates to a yearly cost of around $150,280.
Furthermore, as a small business owner, you may make payroll mistakes that can cost money in the form of additional taxes, fines, overpayments to workers and administrative fees for correcting errors.
It is comparatively less expensive to hire a payroll consultant than hire full-time staff or handle it yourself. Consider it a long-term investment.
- Lower overhead
According to the IRS, 40% of small and medium-sized businesses spend an average of $845 in noncompliance penalties for late or erroneous filings each year. Outsourced payroll consultants are tax law specialists, and it is their responsibility to stay on top of the laws and developments in that domain to make sure you stay compliant and avoid tax penalties. They can also submit tax records on your behalf, pay your state and federal taxes, and handle your employees' 1099 and W-2 forms.
- Minimizes compliance risks
Payroll processing is not only complex, but also fraught with risk. The possibility of embezzlement, identity theft or tampering with corporate papers for personal benefit cannot be ignored, even among trusted personnel. Additionally, you must ensure the security of your in-house payroll software. While the software may be reasonably safe, the server or network on which data is stored may contain security holes that lead to data theft.
Payroll providers keep your data on highly secure servers that protect your confidential data using cutting-edge encryption technology.
- Better data security
Payroll experts keep up with ever-changing rules governing payroll, benefits and taxes. They are trained to maintain accurate records, generate payroll data and submit statutory files on time and ensure employees are paid correctly to account for sick days, advances and the like.
If your company adds staff, you'll be faced with new restrictions. As you scale, a payroll specialist can help you address the details. For example, the Affordable Care Act mandates that enterprises with at least 50 full-time employees – or full-time equivalents — offer health insurance.
- Services scale up with your business
Another advantage of outsourcing payroll is having access to a customer care team available 24 hours a day, seven days a week. They can assist with any concerns, regardless of the time of day, in the event of an emergency.
- 24/7 customer service