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Why Your Business Should Outsource Payroll

By Chad Chandler | | 0

Outsourced payroll serviceOne of the most common departments outsourced by small and medium-sized businesses is the payroll department. Considering the cost involved in hiring and maintaining a specialized internal department, the attraction of outsourcing is evident. Usually framed as focusing labor money on core business, it also allows administration to get rid of a set of tasks that they are seldom familiar with, and that become increasingly onerous as regulatory requirements shift on a seemingly weekly basis.

Some businesses, however, balk at the perceived cost of outsourcing, instead opting for a third option. As a half-measure, they assign payroll tasks to an employee working in a related administrative field supported by software. But, is this a good idea? Before deciding to "dump" the payroll responsibilities on Bob from Sales (but he minored in accounting), there are a few things to consider.

  1. Are you really saving money? The promise of savings sounds too good to be true, and it may very well be. Perceived savings from cutting expenditures are easily made up for by an increase in labor costs, effectively hiding increased cost in another column of the books. Even assigning the tasks to an existing employee, your labor budget will have to absorb the increased man-hours. These expenses are more than just an every-two-weeks additional duty; modern payroll requirements demand constant attention. While outsourcing isn't free, it does cut labor. You avoid the expense of recruiting, training and retaining dedicated payroll staff. You also aren't sending good money after bad by paying an ill-trained employee overtime for doubling the workload.
  1. Are you sure you are taking care of your regulatory responsibilities? Outsourced payroll offers a tailored solution to regulatory requirements. While some of the statutes are national initiatives, such as the Affordable Care Act in the United States, each city, county, state, or province may have particular rules regarding payroll administration, an increasingly specialized field requiring constant compliance. A department or individual doing double duty with payroll as an additional assignment will have a hard time staying abreast of the shifting legal landscape. This can cause problems if your business, employees, or supply chain crosses state or national borders and the myriad of regulations each has enacted. Webinars and stand-alone automation offer a one-size-fits-all solution to this regulatory miasma, but is it effective? If you are offered a suit that fits anyone, you can bet it hasn't been tailored to you. If you wouldn't wear that, why should your company?
  1. Are they operating on the schedule you need? There is a tendency to worry about payroll on a two-week cycle. As stated, this is a dangerous pattern. Many of the statutory requirements above have a set time frame. If your company is audited for any aspect of their mandates, will your payroll clerk be able to compile the necessary reports in the required format promptly, then send them to you for review and submission? What about their other responsibilities in the meantime? If you need a payment off-cycle or a check is inadvertently missed, how much time will be lost on other projects while they get back into the payroll system to track down the error? What will delayed checks mean to morale?
  1. Is automation alone the key? Isn't it strange that sales always picks up, but service will have to call you back later...maybe? Specialty software as a one-time purchase may ease the workload but fails to provide the support necessary for small to medium-sized business to enjoy the full confidence of professional payroll administration. Often it just means one more system for an understaffed department, or an overworked employee to attempt to master.

Proper handling of payroll administration is black and white. You either expend valuable resources to field a large and full-featured payroll department, or you find a professional partner you can trust to handle the details. We offer a scalable approach that allows you to realize real savings and maintain your regulatory responsibilities. This allows a leaner administrative team to focus on their fields of specialization.

Chandler & Knowles CPAs tailors accounting and payroll solutions to your business's particular needs. You focus on your customers and clients. We'll handle the numbers. Contact Chandler & Knowles CPAs today and begin designing a payroll strategy for your company's needs.

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