With a large company, payroll involves more than writing a check for each employee. Withholdings for taxes, Social Security, IRAs, profit sharing and other requirements complicate the process. Instead of wasting man hours preparing bi-weekly paychecks or risking costly withholding mistakes, consider investing in a payroll service.
Payroll services explained
Companies are required to pay federal, state and local taxes in addition to deducting Medicare, worker’s compensation and other fees from each employee’s paycheck. These deductions must then be recorded for auditing purposes. A payroll service completes the complicated tasks of recording all payroll taxes, submitting paychecks, and offering instant access to HR information for a fee but can be worth it because of the time it saves.
Companies submit a list of employees, hours they work and other information. The payroll service processes this information, distributes paper checks or direct deposit and provides tax and payroll reports to the company. The process is easy to implement, and versatile.
A payroll service can perform additional services as needed by individual companies. These services range from administering benefit and retirement plans to ensuring tax compliance. Each company receives individualized service and remains compliant with data security as well as federal and state regulations.
Benefits of outsourcing payroll
- Saves time and money. Outsourcing payroll means the company doesn’t need to pay several employees to handle the complicated withholdings and reporting.
- Current software limits mistakes. Completing payroll by hand leads to human errors that cost a company time and money to correct. A payroll service limits these costly mistakes and errors.
- Simplifies the process of making payroll changes. Adding or removing employees, making salary changes or changes in the tax table requires simple data entry instead of completing complicated calculations on multiple pages.
- Limits the accounting department’s need to spend hours on payroll every week and allows them to pursue other areas of need in the company. Instead of spending hours calculating and recording deductions, staff members concentrate on lowering expenses, managing the company’s overall budget and increasing the bottom line.
- Peace of mind for the company’s owner. He or she confidently relies on a service that ensures the payroll is handled properly, efficiently and affordably.
How to determine ROI for outsourcing payroll
When deciding whether to outsource payroll, it must be cost effective for businesses. First, determine the cost of data gathering, processing, disbursing and reporting. For most large companies, these costs average thousands of dollars every month and require more than one employee. To determine the ROI, consider several factors.
- Number of employees
- Frequency of payouts and pay cycle
- Number of manual checks distributed
- Time required to add and remove employees
- Number of errors that require correction and authorization at multiple employee levels
- Time required to submit monthly, quarterly, semi-annual and annual reports for each employee
- Cost of preparing and distributing reports
- Effort required to meet federal, state and local compliance laws and regulations
Payroll services make sense for large and small companies. Limit payroll-related expenses and maximize profits while ensuring the paperwork is complete and human errors are minimized. Without sacrificing quality or accuracy, payroll service makes financial sense for companies of any size, but the benefits increase with the number of employees.