For most small business owners, payroll is a time consuming and confusing source of frustration. There are a number of intricacies with small business payroll that require meticulous organization and accuracy to avoid penalties and provide timely payment to your employees. Mistakes with tax deadlines, check distribution, benefits, and management/employee inquiries can be a costly process to manage internally. With high costs and the associated risks, many small business owners are looking to outsourced payroll providers to assume the role of the internal payroll department. Here are a few reasons that so many companies are turning to outsourced payroll:
- Time – Processing payroll internally involves many components that can add up to a significant portion of time. Collecting hours, cutting and distributing checks, calculating and remitting payment for employment taxes, developing W-2s and 1099 forms, and responding to all payroll inquiries are just a portion of the typical tasks that must be performed. Outsourcing these tasks can free up hundreds of hours a year.
- Penalties – Payroll processors must be aware of all tax deadlines, calculate and file returns, and account for all employment regulation changes that occur throughout the year. This can be a daunting task for businesses and is often done incorrectly, resulting in costly penalties and additional time spent adjusting returns. An outsourced payroll provider will track all deadlines, accurately file each return, and deliver all annual W-2 documents. Most payroll providers will pay for any penalties that result from an incorrect filing.
- Cost – Processing payroll internally can consume a significant amount of resources and often requires a full-time individual or department to accomplish all of the tasks. When you combine all of the time spent on the many tasks from file maintenance, processing and distributing checks, filing returns and paying for potential penalties, you can see that internal payroll can cost thousands per year to maintain. Outsourcing payroll can add efficiency and accuracy while eliminating the need for an entire payroll department.
Many small business owners are turning to outsourced payroll providers as the solution for their payroll needs. Time savings, cost savings, and eliminating penalties allow a business to focus its staff and resources on the business. Processing payroll can be a confusing and costly process. It is important for business owners to weigh the costs and benefits to determine if outsourcing payroll can be a solution for their business.
Do you work with a great payroll company? Let us know in the comments below…Written by: David Galante TGG Accounting