What About Payroll?
Whatever you consider to be the most important function to your business, we can all agree that your business wouldn’t exist without payroll. Payroll is how you reward your employees for the hard work they put into to make you successful. Along with the other benefits or perks you offer, payroll is typically the most important factor used to attain and retain employees.
With that said, payroll processing and payroll tax responsibilities can be confusing and extremely difficult for a lot of businesses to handle. For example, there are hundreds of tax codes and payroll regulations that businesses need to understand and follow. With so many of these codes to keep track of, staying in compliance can be a major pain point for a lot of organizations.
This is where many organizations face a decision to either have an in-house payroll processor or outsource their payroll responsibilities
39 percent of U.S. companies—more than 10 million businesses—claimed they outsource their payroll processing. And 43 percent outsource their payroll tax responsibilities.
According to a 2016 report by Robert Half and the Financial Executives Research Foundation
Because there is an array of issues to keep on top of regarding payroll, many organizations are trending towards outsourcing these responsibilities so they don’t have to dedicate a lot of time to this highly confusing area of business.
According to Small Business Trends, payroll is a non-core function for businesses.
"A non-core function is one that is not a profit center (meaning, you don’t charge customers for it). A non-core function may be essential but doesn’t differentiate your business strategically from competitors. In most businesses, administrative and backoffice activities such as payroll are non-core functions. As such, they are potential candidates for outsourcing."
So, why should you be outsourcing your payroll? Well, for the following reasons of course!
Common Payroll Challenges
A major challenge facing businesses when they process payroll in-house is simply meeting deadlines. In-house payroll is time consuming and depending on how a company is handling the organization of their employees’ HR data, time-in/time-out, benefits selected and PTO it can be a daunting assignment for most to bring in all these components together when it’s time to process payroll. To manage these moving parts, many businesses are looking to outsource their payroll processing to a single database, all-in-one solution to manage both payroll and HR.
In-house check printing requires businesses to purchase and maintain a check printer/sealer. The benefit of outsourcing to a payroll company is that they are equipped and have staff to handle a large output of checks and reporting, while also handling the packaging and delivery of checks to multiple locations if needed.
Direct Deposit Despair
If your business offers direct deposit services for your employees, it can be painful to handle any reversals or direct deposit breakdowns in-house. A great benefit to outsourcing is that payroll companies will be responsible for sending ACH files, collecting and distributing funds to both employees and 3rd party agencies.
A lot of these payroll processing businesses will also supply your employee base with an employee portal for them to access their direct deposit stubs at any time. This also avoids wasting money and trees by not having to send out paper check stubs.
Staying In Compliance
By outsourcing payroll, businesses are ensured their processing duties are handled by experienced tax professionals. These people are required to stay on top of all updates and changes to current tax laws.
Compliance issues will always be a big reason to outsource as the IRS has many rules and regulations around tax payments, tax filing and record keeping. They issue penalties with interest if employers fall out of compliance.
According to the IRS, "More than 1.8 million tax returns
were audited in 2016 for businesses with income
between $200,000 and $1 million. And 978,564
businesses of all sizes were assessed civil penalties."
A lot of business owners struggle with the ever-changing landscape of tax laws and compliance. To avoid hefty penalties from the IRS, it’s probably in the best interest for organizations to outsource to payroll experts. A lot of these payroll businesses have clauses where, if there are any problems with your payroll processing/ tax reporting such as incorrect dollar amounts, direct deposit and other compliance issues—they will rectify the issues and cover any penalties or fees that might incur from any mistakes made.
Finding Time To Focus On More Business-Critical Issues
It doesn’t matter how many employees an organization carries. Payroll
processing is such a timely and detailed process, it requires the business
owner or payroll administrator to handle large quantities of data that they must double-check for any keying errors.
Because of this, it doesn’t give them any time to help a valued customer
in need, or time to improve other areas of business operations for the