Payroll is one of those administrative tasks that you, as a business owner should not have to shoulder. In fact, it's typically the first service that businesses consider outsourcing — often at the advice of their accountants.
Outsourcing payroll reduces costs, saves time, and eliminates the need to keep up with changing tax regulations. These general facts make a good argument for outsourcing.Processing payroll internally requires training, software and software upgrades, and extensive paperwork. Even when businesses use payroll software, they still have to remember deadlines and to process and mail checks. Processing your own payroll also requires numerous steps and eats up between 40 to 60 hours each year, even for two-employee companies. It's tedious work that requires constantly updating records, printing checks, and answering employee questions. Outsourcing payroll eliminates all of these headaches. Employers who farm out their payroll have less paperwork and spend just a few hours on payroll each year allowing more time for concentration on managing your business.
Each year, 40% of small businesses pay the IRS an average penalty of $845 for improperly filing their payroll taxes. Similarly, businesses overpay state and federal unemployment insurance by $1.45 million each year. These kinds of miscalculations would be greatly reduced if more businesses outsourced their payroll, since processing companies keep track of continually changing tax laws and assume full liability for correctly filing payroll taxes. In the process, payroll processing companies shield businesses from dealing directly with the IRS.