Signs That You Should Outsource Your Payroll

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( — July 19, 2023) —

As a business owner, you understand the complicated, sometimes painful, process that goes into payroll management. However, you also know that this process is vital to your company’s success. Your employees need payment for their work and the government requires reporting and taxes, but like many in business, you may dread this process. Therefore, these are signs that you should outsource your payroll.

You Don’t Understand and Can’t Keep Up With Government Regulations

Your state and the federal government have very strict regulations when it comes to payroll. They require precise reporting and deductions of your staff’s taxes. However, tax laws constantly change. Every legislative session can bring on new requirements that you need to learn and comply with.

If you cannot keep up with these government requirements and changes and you don’t have an in-house staff dedicated to doing so, you can make mistakes that result in penalties and fines for noncompliance. Payroll outsourcing companies like Paypro provide legal guidance and help you manage your payroll properly.

You Find Payroll Mistakes

It may surprise you to learn that approximately one-third of companies make mistakes on their payroll. This process requires significant calculations, from determining employee hours and wages to calculating payroll taxes. You need to figure out how much to take for income taxes, Social Security and Medicare, and this amount can change for every employee every time you do payroll. You also have to manage your staff benefits.

Mistakes impact employee morale when their checks and benefits aren’t calculated correctly. They can also result in costly fines and penalties that your company has to pay the government. Whether you try to do these calculations by hand on a paper-based process or through software, you can make very costly mistakes, and these mistakes are one of the key signs that you should consider outsourcing your payroll.

You Need Time for Business Planning and Other Responsibilities

Even if you have never made a payroll mistake and stay up to date on government regulations, and even if you have expertise in accounting and payroll, as a business owner, you have more important things to do. You are in charge of planning your company’s future. You need to review all your financials, manage your supervisors and staff and pursue financing.

Payroll takes significant time because it is a complex process, which can take time away from your other responsibilities. Even if you have an in-house accounting department, you can increase their productivity by pursuing a payroll outsourcing strategy.   

You Cannot Consistently Update Your Software

Like many small businesses, you may process your payroll through software. However, as regulations change every year, your software becomes obsolete quickly. You typically need to update your payroll software every year just to get the latest tax tables. However, consistently updating software is both expensive and time-consuming.

Payroll vendors automatically update their software at least once per year to remain up to date with new requirements.

If you see any of these signs in your business, consider investigating the advantages and disadvantages of payroll outsourcing, but do your due diligence when you choose a vendor.