Rather than having an in-house team deposit paychecks, calculate tax withholdings, and prepare quarterly tax filings, outsourced payroll handles it all behind the scenes. Plus, professional payroll services significantly reduce the chances of errors in your payroll processing. First-time business owners experience a steep learning curve in all areas, and learning the ins and outs of payroll processing regulations will not generally be on their list of pressing problems to solve. For larger companies, the difficult moment could come when they are expanding into a new state or country and the home office team has not learned the difference in regulatory environments. In all of these cases, errors could go on for extended periods of time, creating trouble down the road when they are discovered. Payroll outsourcing can do the work of a full-time salaried employee, or in larger companies, a whole department.

Many businesses need specialized applications to pay people accurately and on time. The right payroll outsourcing partner can process and monitor payroll proactively for material variances. Instead of building a solution in-house, you can partner with professionals who specialize in payroll administration. Payroll outsourcing certainly has advantages, but no single resource has the ability to point a company toward guaranteed success with payroll management. Company leaders should not take a decision about outsourcing payroll lightly but should understand its convenience and financial savings. A solid understanding of payroll outsourcing’s pros and cons, along with accurate information on existing payroll management costs, can offer helpful guidance.

Should I outsource payroll to a vendor?

In fact, according to a Deloitte survey, as many as 45% of small businesses say avoiding mistakes was a reason they chose to outsource payroll. Prominent companies that offer both PEO/EOR and standalone payroll outsourcing services include Rippling, Deel, ADP and Papaya Global. Payroll outsourcing providers specialize in doing one set of tasks well.

It’ll be one less thing for you to think about (and potentially mess up). A lot of small businesses manage to keep everything straight (and you can always check out our guides to getting set up right and calculating payroll). But if you feel like you might be ready receivable turnover ratio to outsource payroll, here are some signs that it’s something you should explore, as well as some information about choosing the right type of provider. Payroll service providers typically have the infrastructure in place to handle crucial data securely.

Frequently Asked Questions

If there is an error on the part of the outsourcer that may or may not lead to a fine against the employer, are they held financially or legally responsible in any way? Compare the customer service and data access availability in the contract to the access previously discussed to ensure you have the support and availability promised. When outsourcing payroll, all data will be held by the third party, not the employer. For management teams who frequently need to access employee data after hours or on weekends, this could be an issue. Some services may make all data available at all times through a software service, this can reduce the disadvantage, providing staff and management are able to successfully navigate the software. Most payroll outsourcing services work with many different clients and should have professionals trained in accounting, benefits administration, and tax reporting.

• You can increase the accuracy and efficiency of your payroll processes and retain insight into your data by partnering with the right payroll professionals.
• Non-compliance can result in costly fines, dissatisfied employees, and damage to your company’s reputation.
• Many companies choose to outsource functions that aren’t as critical to their business and don’t offer a competitive advantage.

In this article, we explore everything you need to know about these two types of payroll outsourcing, including looking at how the processes work. You’ll find recommendations on which questions to ask to find a service that directly supports your needs. You may want to weigh the pros and cons when you’re exploring managed options. The right solution may look different for every organization’s objectives. Whether you’re responsible for managing your organization’s payroll or looking into outsourcing payroll, see our advantages and disadvantages chart below for a quick overview.

Frequently asked questions about payroll outsourcing

A payroll outsourcing company will ensure that the employee’s paychecks are credited on time, and the necessary deductions are credited to the respective government departments. After you choose a payroll provider, you’ll need to give them all the necessary data, such as employee information, working hours, wages, deductions, and benefits. This usually means setting up an account on their platform to grant access to your current payroll information. If you outsource all your HR functions, they’ll likely be performed by employees of your tech provider. Alternatively, this person or group won’t work directly for the provider, but will have the access they need to run payroll. Despite fewer employees, it’s still hard on tight HR teams — some made up of just one person — to accurately run a small business’s payroll.

An accountancy firm with local offices may provide the greatest level of service for a company based in one jurisdiction. For others, a payroll outsourcing provider may be more attractive because they are often able to service employees in many states and countries, and may offer additional options such as full HR outsourcing. For those considering working with a PEO, one that offers payroll outsourcing services only as an option may be a good way to start the relationship before fully committing to all PEO services. Where an international PEO is engaged, all employer obligations — not just payroll — are taken over by the third party company. An international PEO is also sometimes know as a global employment organization.

How do you find a qualified payroll outsourcing partner?

The payroll outsourcing provider should be able to process payroll in compliance with local regulations, though the employer is still liable for any breach of compliance. Some PEOs or Employers of Record (EORs) offer payroll outsourcing as a standalone service. If you are hiring internationally and your employees need to be hired by a local company by law, a PEO operating in the area will be able to help with employer of record services as well as payroll processing. Outsourcing the management of these business functions can be especially attractive to startups and small businesses. Some think, “Why outsource payroll if I have to know about taxes and regulations anyway?

How to Hire International Employees: Process and 4 Global Hiring Solutions

This means that international payroll management requires a deep understanding of each jurisdiction’s specific rules and legislative changes. Navigating these complexities while ensuring accurate and timely payroll processing can be a significant challenge for organizations that don’t outsource to expert payroll providers. Outsourcing payroll is when a business pays a fee to another company to handle processing employer paychecks. In addition to making direct deposits or sending physical checks, this should also include deducting employee tax payments and employee contributions to benefits packages.

Payroll processing may also be bundled with a number of other HR or accounting services. If you want the human touch, a traditional payroll service could be the way to go. Each pay period you’ll send them all your wage information, then they’ll do all the math, cut the checks, and handle your taxes. Payroll services have the disadvantage of costing a little more than payroll software with similar functionality, but some business owners feel more comfortable with having a go-to person for their payroll needs. As with any payroll-related decision, make sure to check ratings and reviews of any service you’re considering.

With more accurate and timely reporting, you can gain more valuable insights into your pay data—including data that feeds into other HR strategies, such as pay equity across your workforce. Only half (55%) of leaders surveyed in Ceridian’s 2022 Executive Survey say they are currently using technology to benchmark compensation. To transform your payroll function into a strategic opportunity, you need to be able to leverage your data for smarter decision-making.