Starting a business, monitoring profits, and onboarding employees involve a lot of hard work. On top of that, paying said employees can be quite an overwhelming and time-consuming task to say the least—especially as your business continues to grow.
If you’re feeling over your head just with the thought of payroll management, then you’re in luck. There are services available to outsource payroll; which means you can unload one less thing on your plate as a business owner. While the idea of entrusting such an important task to something external from your business may be nerve-wracking, there are options that will put you at ease.
Is Outsourcing Payroll Right For You?
Did you know that a study done by Paychex found that professionals spent an average of 11 hours a week on payroll? That’s a lot of valuable time that you could be spending on other responsibilities. However, prior to outsourcing payroll, it’s wise to do a cost/benefit analysis.
Consider how much time you’re willing to spend on studying tax codes, tracking possible errors, and such. You’ll also have to be on top of the ever-changing aspects of payroll. Is it worth the work in comparison to hiring an external provider to do it?
What Does A Payroll Outsourcing Service Do?
So you’ve decided that it’s worth it–congrats! If you are wondering what services you’ll need covered by the outsourced payroll provider, here’s a snapshot of what you’ll need:
- Runs your company’s payroll and account for taxes and withholdings
- Prepares and issues W2s
- Sends out checks to your employees or set up direct deposit
- Makes payments to vendors on your behalf
- Fills up government-issued paperwork out for you and your employees
- Manages your employees’ benefits
- Provides payroll reports
Tips For Hiring the Right Payroll Outsourcing Service
Ensure That There Is A Low Error Rate
Mistakes happen–we’ve all made them. But when it comes to payroll outsourcing, you want to make sure that it doesn’t happen as much as possible. The last thing you want is for the IRS to come knocking on your door because something wasn’t filed properly. It’s been found that 40% of businesses have been penalized by the IRS for incorrect payroll filings at least once. Not ideal? Yeah, we know. That’s why this is such an important tip!
When going through possible providers, evaluate their track record and the systems they have in place to prevent errors. Read online reviews and see if any repetitive issues occur. Also, don’t be afraid to ask the company how they tackle mistakes when they arise. It’s important to see how they go about this so that you can gauge whether or not they can be trusted.
Hire A Company That Handles Your Business Type
There are different types of payroll outsourcing companies—which we’ll get into later on—so find one that has experience with businesses like yours. As a small business owner, you want to work with a company that specializes in small business. They’ll be accustomed to working with fewer employees.
It’s also wise to hire a company that is familiar with your industry. Doing so will ensure that they have a profound understanding of your niche; giving them the ability to offer better advice and service options.
You Want Them To Grow With You
As you grow, you want your payroll outsourcing to grow alongside you. Don’t shy away from asking them what they can offer once you’ve expanded. For example, if you are in the beginning stages with only a handful of part-time employees (meaning no benefits), their workload is lighter. As you grow and hire full-time employees, your needs will shift.
Choosing a company that can navigate and adjust through the changes your business goes through is ideal. Although changing payroll companies isn’t as complicated, it’s not worth the headache when it can be prevented early on.
Have A Confirmed Representative
Customer service is imperative, including payroll. How many times have you reached out to a representative with a problem only to be met with no response or hour-long idle times? Every minute you spend waiting, you lose time for something productive.
If you encounter issues with payroll, you’ll need prompt responses. Before agreeing to hire them, ask whether or not they will have a representative dedicated to your business. A direct line will make a world of difference when you run into any problems. The whole reason you’re hiring them is to make your life easier.
Consider Contract Length And Cost
Take a look at your business’ budget and see what you can afford. Doing so will set you up for success when the time comes for outsourcing services. See whether or not a company has a flat fee regardless of employee numbers, or if they charge per employee. You may consider a flat fee if you see yourself rapidly growing but don’t want to be charged per head.
Lastly, consider the duration of the contract. Some companies offer month-to-month, while others offer annual or even multi-year. If you have no experience with outsourcing and you want to test a company out, month-to-month may be your best option. However, if you’re looking to save money, an annual contract may be a better fit.
Different Types Of Payroll Outsourcing Options
- Full-service payroll company – This is what was primarily discussed in this article. With them, you’re paying for the experience and accuracy.
- A PEO – A PEO (aka a Professional Employer Organizer) – They provide payroll help as well as HR services. Because of this, they tend to cost more than a company that focuses solely on payroll responsibilities.
- Automated Payroll Software – Although this is not considered outsourcing since you will be doing the work yourself, it’s an option for those who cannot afford to pay a full-service payroll company’s price tag. Just be prepared to do some work.
- Contractor Accountant – Contractual work is usually more cost-efficient than hiring a full-time employee or whole company. As a small business, you may benefit from working with an independent contractor; though you’d want to make sure that they avoid misclassification issues.
Final Thoughts On Outsourcing Payroll
With all of this information, it’s time to go and see if outsourcing payroll services is for you. Don’t be afraid to ask questions and scan available options before settling with one. Consider your budget, the size of your organization, and what services you need assistance with before locking in.