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Is Payroll Outsourcing a Good Idea for a Small Business?

December 6, 2018

Good payroll professionals make their jobs look easy. This is partly because they don’t want to make other employees worry unnecessarily, but it’s also because they are capable and skilled at their jobs. Nevertheless, many people seem to think that payroll is an easy job. Seriously. There are people who believe that payroll consists entirely of entering the right data into the right payroll spreadsheet. As ridiculous as this sounds, the idea that HR and payroll are easy seems to persist, especially when it comes to startups and small businesses.

Building a business isn’t easy. Payroll administration isn’t easy, either. But outsourcing offers real advantages for a small business.  

Outsourcing Payroll Saves Money

There are many natural costs associated with doing business – things like equipment maintenance, software licenses, and payroll. There are also things that aren’t natural costs of doing business, or shouldn’t be – things like fees and penalties for late reporting.

In outsourcing payroll, you are eliminating unnecessary fines. You are also saving headcount and helping to keep your managers and producers focused on building the business. By making sure payroll is something your employees don’t have to worry about, you are even helping to limit one of the main motivators for turnover.

Laws around work are changing quickly, and when those laws change, payroll practices must change with them. Some of these changes can be quite a challenge. For instance, the state of Massachusetts just enacted the Grand Bargain, which, among other things, calls for several changes in the state minimum wage and the premium pay workers get for working on Sunday.

The scope of the changes in Massachusetts are breathtaking, but the changes in other states are equally remarkable. For example, there are a number of changes to payroll deductions that go into effect next year, including changes in pre-tax deductions for 401k and HSAs. The state of Washington is proposing a massive overhaul of taxes and benefits for white collar workers and the city of Birmingham, Alabama is fighting the state for the right to require employers who have operations in the city limits to pay a higher minimum wage. These are just a few examples of upcoming regulatory changes.

Your company is responsible for complying with the law no matter what the changes are, and whether you know about them or not. The consequences for being out of compliance can be quite stiff. This is exactly why companies outsource payroll. When you outsource payroll, you have competent, dedicated payroll specialists who will make sure that your employees are correctly paid and within compliance of all state and federal laws.

Outsourcing Payroll Eliminates Headaches

Your employees may be great people who enjoy working for you, but they still want to get paid correctly and on time. Nothing will throw off your company’s performance like employees who are preoccupied with whether or not they will be paid correctly next pay run. Uncertainty around payroll breeds drama, which, in turn, hurts the performance of your employees and ties up your managers with putting out fires that never should have existed in the first place.

The wonderful part about payroll outsourcing is that it puts the stress and worry into someone else’s hands. When you work with dedicated payroll professionals, you have someone to rely on for everyday concerns, as well as the big issues that may come up. This frees your managers to spend more time developing the business.

Outsourcing Payroll Frees up Time to Develop Business

The idea that payroll is easy invites disaster, but the most damaging aspect of this misconception is that it can take time and energy from building the company.

The more people your company employs, the more administrative headaches you will face. It’s easier to handle payroll for five than it is for fifteen people. As your business succeeds, your headcount will grow and so will your challenges with payroll. A lot of people consider this the downside of success, but it doesn’t have to be.

Outsourcing payroll means that you have one less worry on your plate. When you outsource payroll, you can concentrate on building your business and serving your existing customers rather than making sure the W-2s and 1099 forms will be postmarked before January 31.

For more information on how Commonwealth Payroll & HR can work with you on your strategic human resources planning, call us today at 877-245-1159.

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