7 Benefits of Payroll Outsourcing

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Gabriela Tan
January 24, 2024
A payroll specialist from a payroll outsourcing company is writing a cheque.

As the owner or operator of a business with employees, you’ll eventually come across the daunting task of payroll. Whether you only have one employee to pay or hundreds, it’s something that can’t be avoided. 

For someone who’s never had to process payroll before, it can seem very overwhelming and complex — especially, when considering all of the laws and compliance rules. According to the IRS, ​​33% of employers make payroll errors each year, which results in costly penalties. Considering the high stakes of running payroll correctly, you might be wondering whether outsourcing payroll is right for your business. 

In this article, we’ll be going over the complete rundown of what you need to know about payroll outsourcing. From the definition of payroll outsourcing to things to consider before implementing it, we’ll cover all the essentials for you to make an informed decision on your payroll processes. 

What Is Payroll Outsourcing?

Payroll outsourcing refers to the process of using an external service provider to manage either all or some of your company’s payroll processes. These payroll service providers handle a variety of payroll tasks, such as calculating wages and deductions, submitting taxes, issuing paychecks, and more. Having a third party take care of payroll compliance not only frees up your time as a business owner but also gives you peace of mind knowing that your employees are paid accurately and on time. 

What Is a Payroll Management System?

A payroll management system is a platform that’s specifically designed to automate and streamline payroll functions. Depending on the payroll service provider you choose, payroll management systems can come in different forms including software, cloud-based, or an integrated HR suite. Using a payroll management system can help you automate certain payroll tasks and act as a centralized hub for employee data, which minimizes manual work, reduces errors, and saves time. 

A screen from Push's payroll management platform.

What Are the Benefits of Outsourcing Payroll?

Now that you’re all caught up on the basics of payroll outsourcing and what a payroll management system does, you might be wondering why a business would choose to outsource its payroll. Below, we’ve outlined the benefits of outsourcing payroll to give you a better understanding of how it can benefit your business.

Here are the 7 main benefits of outsourcing payroll:

1. Cost Efficiency

One significant benefit to outsourcing payroll is the cost efficiency that it can bring to your business. Using a third-party payroll provider can eliminate the need for a dedicated in-house payroll team or staff member, while reducing potential errors and penalties associated with complex tax regulations. In addition to that, you can expect to see an overall increase in efficiency and cost savings from streamlining and automating your payroll functions.

2. Time Savings

Another substantial benefit to outsourcing payroll is the immense time savings. With a payroll provider and their automated systems handling complex calculations, deductions, and filings, it eliminates the need for manual data entry and paperwork. All in all, payroll outsourcing frees up time for you to focus on core business functions, rather than payroll tasks. 

3. Access to Expertise

As a business owner, there are several different functions of a business that you’re required to oversee. However, it’s nearly impossible to be an expert in each — for example, most of your expertise may be in sales, rather than HR and payroll. With that being said, payroll outsourcing gives you access to payroll experts. You’ll have the knowledge and experience of a payroll specialist to advise you on the compliance and legal aspects of payroll without the need to hire someone internally. This alone can save you thousands in penalties. 

An employee from a payroll outsourcing company is working on the computer.

4. Improved Accuracy and Compliance

With automation playing a big part in payroll processing, payroll software improves accuracy by utlizing payroll calculators that adhere to tax regulations. Additionally, since payroll providers have dedicated teams, they’re typically the first to know of new regulations. On top of that, you can have peace of mind that your tax filings will be submitted accurately in a timely manner. The combination of human expertise and automated systems makes a powerful safeguard against compliance risks. 

5. Convenient Payroll Reporting

Having all payroll functions and data in one streamlined service allows you to easily access payroll reports. Whether it’s for your own internal accounting purposes or to respond to an inquiry from a tax agency, you can quickly run reports across multiple aspects of your payroll. These reports can include information such as taxes paid, wages paid, taxes withheld, and more. Additionally, some payroll providers offer custom reports that are created based on your needs, which can be beneficial for larger or more complex business models. 

6. Employee Satisfaction

Everyone loves payday! Considering that many people treat payday as a reward, payroll outsourcing keeps your employees happy and motivated by paying them accurately and on time. Using a payroll provider also gives your employees access to self-service portals to make it easier and more convenient for them to update important information and access documents. Some providers offer hiring and onboarding software in addition to payroll, which allows a seamless experience for new hires from start to finish. 

A happy employee is receiving her pay check from the outsourced payroll accountant.

7. Flexibility and Adaptability 

Payroll outsourcing can offer flexibility and adapt to your business’ changing needs. Whether your business is small, large, or has a seasonal workforce, a payroll provider can often tailor their services to accommodate. Often a one-size-fits-all solution doesn’t work for every business, which is why customization options are key. Payroll outsourcing can also adapt and scale with your business, which means that if you like a certain payroll provider, you can maintain consistency and stay with them as your business grows. 

Things to Consider Before Outsourcing Payroll

While it’s evident that there are many benefits to outsourcing payroll, is it right for your business? Here are 4 things to consider before outsourcing your payroll:

  • Cost: Although outsourcing payroll should save you money, it could end up costing you more depending on the size of your business and its needs. Get quotes from multiple providers before making a decision, and ensure you are not paying extra for features or services that you don’t need. You can also do a cost-benefit analysis to see if it’s more beneficial for you to keep your payroll in-house rather than outsourcing. 
  • State-Specific Regulations: Some states, like California, have state specific labor and payroll laws. Ensure that your new payroll provider is well-versed in all state laws and regulations. As mentioned above, the one-size-fits-all solution doesn’t work for payroll, so ensure that you are finding the right expert for your industry and location.
  • Services Offered: Shop around for payroll providers and ensure they have a proven track record along with being insured and bonded. Decide which payroll services are important to you and find a provider that offers what you’re looking for. 
  • Additional HR Services Required: As your business continues to grow, you might eventually need additional features, such as hiring and onboarding, time tracking, and scheduling. Consider whether these add-ons are an option with the payroll provider you choose. 

Final Thoughts: 7 Benefits of Outsourcing Payroll

All in all, leaving behind the headache of in-house payroll for outsourcing brings convenience and a slew of other benefits. From reducing costs and improving efficiency to ensuring accuracy and compliance, outsourcing your payroll can be a strategic business decision that’s worth the investment. While it may not be for everyone, there’s no doubt that outsourcing payroll allows businesses to redirect their resources where they’re needed, such as for operational functions and marketing. Let your business soar by leaving the paperwork behind and stepping into the world of streamlined payroll automation. 

Ready to take the first step to outsourcing your payroll? Learn how Push can enhance your business with our comprehensive people management solution. Book a demo with us today! 

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January 2024


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