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Should You Outsource Your Company’s Payroll Administration?

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Should You Outsource Your Company’s Payroll Administration?

There is a misconception among employers that once they’ve purchased and implemented a new payroll system, the extent of their involvement is over. The truth is, their work is just beginning. Administrating a payroll system can be complex and time consuming. While some larger companies have the resources to handle this on their own, many small to mid-sized businesses are left weighing their options. This is where managed payroll services come in.

What are managed payroll services?

Managed payroll services are those offered by a third-party vendor to whom you completely outsource the administration of your payroll processes. The vendor will be responsible for handling all payroll requirements, including data preparation, tax filing, end of year reporting, and more.

Outsourced payroll administration may seem like a luxury, but it’s actually an economical option that will save you time, money, and some sanity in the long run. Below, we’ve outlined some of the most common payroll-related issues small to mid-sized business employers face and how outsourcing the administration of your payroll can help address them. If you’ve ever found yourself in any of the following situations, you may want to consider managed payroll services.

1. I need someone to run my company’s payroll system. None of my current employees have experience with this, and I can’t afford to hire a brand-new employee just to fit this role.

Once they realize what their payroll system requires of them, many employers will designate and spend money training an employee to run payroll, or even hire someone specifically for this task. This can be bypassed altogether by outsourcing payroll management. Yes, you will have to spend some money on these managed payroll services, but it costs significantly less than the alternatives, and provides greater value as you will be working with highly skilled, experienced payroll professionals.

2. Our in-house accountant is doing his best to run our payroll processes, but becomes flustered whenever he’s faced with a situation out of the ordinary.

Processing payroll may seem straightforward if you’re only thinking in terms of your regularly scheduled pay day, but there are many abnormal circumstances that can come up and throw off the typical routine. This could be anything from administering a bonus or reimbursement to preparing severance payment due to employee termination. In these cases, someone that is not used to handling such specific requests can easily run into trouble, slowing down time sensitive processes or completely disrupting them. When you outsource your payroll to an experienced professional, you can ensure these processes will be handled quickly and efficiently, even when an issue or abnormal circumstance may arise.

3. I worry constantly about compliance and tax penalties regarding payroll.

Managing a small to midsized business is challenging enough, without considering the stress of having to keep up with complex regulations. According to ADP, 90% of employment law class actions filed in the US are related to wage and hour issues. Outsourcing payroll administration to a team of experts whose job it is to stay up to date on these regulations and ensure that no mistakes are made will not only relieve you of this stress, but save you from costly potential penalties.

4. My HR Manager has some great ideas for improving employee engagement, but between her typical job duties and processing payroll for the whole company, she is stretched very thin, making it difficult to put these new plans into action. 

Processing payroll is a vital part of any business which means someone will always need to be responsible for getting it done. Unfortunately, this will often fall on someone who’s actual job function is something else entirely, like an HR department or internal accounting employee. Not only will they not have the same level of expertise that a payroll professional would have, but their own job responsibilities may suffer as a result. Managed payroll alleviates this burden allowing these resources to go where they are needed more.

5. The employee who handles our internal payroll processes expressed concern that she was not making as much money as other employees after seeing how much money everyone else makes.

When payroll is administered internally, it is inevitable that the employee responsible will see others’ salaries – even yours! This may not appear to be that serious of an issue on the surface, but it can lead to underlying tension that may affect your company culture as a result. By outsourcing payroll, you’re handing this information over to someone who has no personal stake in it, avoiding any awkward conversations about who makes what and why.

Managed payroll services are the best way for employers to maintain control over their payroll processes while relinquishing the day to day responsibilities. By outsourcing payroll to an expert, you save time, control costs, ensure enhanced accuracy and minimize compliance risk, without having to give it a second thought. Payroll management is compulsory for any organization with employees, but there’s no reason it should take any focus away from the business itself. Leave payroll to the experts, and get back to what’s really important, the success of your business.

| Categories: Payroll | Tags: payroll , managed payroll , payroll administration , outsourcing , hcm | Comments: (3) | View Count: (4783) | Return


  • My brother wants to start his own business, but he isn't great with handling things like human resources. I suggested he outsource this service instead of doing it himself, and your article had some great information about why or why not this would be a good idea. You mention that outsourcing payroll administration to experts whose job it is to stay up to date on regulations ensures no mistakes are made. This relives stress and saves money, so I'll be sure to share this with my brother so he'll considering this option for his future business.
    11/7/2018 8:54:16 AM Reply
  • I can see why outsourcing your payroll services might help a company deal with unexpected situations. You make a great point about how an in-house accountant might become flustered when dealing with something outside of their typical routine. This sounds like a great way to free up their services while also avoiding any errors, which could cost the company a lot of money down the road.
    10/12/2018 9:28:17 AM Reply
  • I really liked your article. Quit impressive. Thanks for sharing with us. PEO firms provide small employers the unique opportunity to offer their staff a robust and medical plans,Insurance & health benefit.
    9/10/2018 5:01:50 AM Reply

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