Does Payroll Outsourcing Save Your Business Money?

Time & Pay Staff

Does outsourcing your payroll save your business money? You may consider this question self-serving considering the source, but in challenging economic times, businesses need to be very aware of any methods they can employ to lower operating costs. Outsourcing your payroll can be an excellent cost-cutting measure. How.....?

In general, professional payroll services only get paid for the number of checks they produce. Thus payroll processing becomes a variable cost, a direct function of the number of employees you have, as opposed to a fixed cost of having an employee on staff processing your payroll. For example, an outsourced solution for a company with 20 employees paying on a weekly basis will cost on average between $45 and $55 per payroll period. This includes pay checks, management reports, tax filings (with guaranteed compliance), quarterly reports and more. This translates into about $2,600 per year. You know that you cannot hire a person in-house to do payroll for that little cost. For a qualified individual, it would be at least 10 times that, plus overhead. Now reduce staff by 5 employees and the cost of the payroll service goes down $300+ a year, while your fixed in-house staff cost remains the same.

Unlike your in-house staff, your outsourced payroll professional always keeps up with the rules and regulations, never works overtime, never goes on paid vacation, never gets sick pay, and will always be there around the holidays to meet any special payroll needs you may have.

Yes, we know this in-house person may be doing some other bookkeeping functions as well, but keep in mind processing payroll does not generate any income for your business. During these challenging economic times, shouldn't your staff spend as much time as they can on servicing your existing clients, finding new ones, collecting valuable receivables and other income generating tasks?  

What are other cost saving advantages?
$$  Guaranteed compliance. The IRS notes that up to 40% of all businesses will be subject to costly IRS penalties for compliance failures. A reputable payroll service will take responsibility for any penalties that are a result of errors on their part thus eliminating the cost of non-compliance penalties. The cost of compliance is always less than the cost of being caught for non-compliance
$$  A good payroll service provider will include other compliance services such as new hire reporting (included at no cost as part of Time & Pay services) or garnishment compliance that will eliminate your cost of meeting those requirements and the greater risks/costs of non-compliance.
$$   A good payroll service provider will utilize superior systems that will eliminate all the costly errors associated with manually calculating paid hours, payroll, payroll taxes and other associated information as well as the cost of redoing the payroll if errors are made. (Think you produce an error free payroll? Check this information out.)
$$   A good payroll service provider will offer quality, in-depth payroll reports that will help you better define, and thus control your labor costs as well as integrate the information with your accounting system.
$$  A good payroll provider will be able to provide you with a quality automated timekeeping system that will eliminate most of the costs, and all of the costly inefficiencies, of tracking hourly employee's time at work. (Still using a manual time clock or time sheets? Check this information out.)
$$  Often times, employers are not aware of, or do not take advantage of, pre-tax deductions. A good payroll provider will be able to help you determine pre-tax benefits, accurately account for and process pre-tax deductions  and create tax savings for your company that often times exceed the cost of the payroll service provided.
$$  A good service provider will be able to offer you other cost-saving means to help you manage your employees, their benefits and other HR issues, areas that are fraught with risks/costs if overlooked or ignored. For example, as a customer of Time & Pay, you have complimentary access to qualified HR consultants to address HR issues that need your attention due to legal considerations. This is a very valuable service that could normally cost you thousands of dollars a year depending on how often you need the expertise.
$$  A reduction in the "cost of ownership". Studies have shown that companies will significantly underestimate the cost of implementation and maintenance of in-house payroll/HR software and technology. When you take into account required IT infrastructure, labor, maintenance, as well as other costs of bringing this technology in-house, the costs add up quickly and exceed outsourced solutions.

Yes, there may be a few situations where outsourcing your payroll may not be cost-effective. However, you will never know if it may save your business valuable resources unless you take the important step of evaluating an outsourced solution for your business. As it becomes more and more important for businesses to operate as efficiently as possible in order to keep the doors open and maintain a competitive edge, you may be overlooking an important avenue for your cost-cutting measures if you have not looked at an outsourced option.

For over 15 years, we have been providing our customers with cost effective services that help them better manage their payroll, their employees and their business. Our Time & Pay representative will sit down with you, listen to your needs, and help you determine if an outsourced solution is right for you in meeting your business needs and cost saving goals. We'll provide this valuable evaluation free of charge with no obligation. Contact Time & Pay today to see if an outsourced solution will provide you with the means you need to meet your company's management goals.