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Payroll: A question of keeping it or outsourcing

October 3, 2012

Many small business and HR professionals agree that processing the payroll is one of those jobs they would love to offload.  Outsourcing is a great option for many companies; however, outsourcing doesn’t mean you can wash your hands of the process.

There is a lot more to it than just handing over files and then everything coming together like magic. Although many people want someone to finish payroll for them instantly, they first need to share information with the company.

Payroll can be challenging for small businesses that do not have many HR resources. The business owner will need to work closely with the payroll provider to share weekly information, including but not limited to hours worked, contractor agreements and of course deductions for each individual such as health care, 401k, and any other type of benefits. HR files hold all sorts of important information from personal records and salaries to bonus structures.

Before choosing any payroll-processing company, businesses should take their time and learn about the real costs and benefits of using outsourcing and the standards and experiences of the vendors they are considering using. In most cases, small companies with less than two hundred employees can often save money outsourcing as opposed to hiring a full-time, experienced HR professional who also has the in-depth payroll knowledge that is needed to keep the company in compliance.  After the evaluation process, you will need to decide which services you need and make a final selection for your provider. Reputable payroll service companies will have different service levels and typically offer a sliding scale on pricing to fit your company’s exact needs and size.

Kathleen M. Egan CPA PLLC advises to discuss not only how payroll will be processed, but also what kind reporting structure will be in place with you and your provider. If your company usually gives out a report that shows employee attendance, find out if the report will be covered under the outsourcing contract or if it will cost more to get it. If you have people in your company writing checks there is no trouble getting one when you need it, but it could be a little trickier when you outsource your payroll. Make sure that everyone has a clear understanding of the agreement up front.

Companies that are considering switching over to outsourcing their payroll should give plenty of time for the data conversion and gathering of information that is vital for this sort of move. Business owners will want to make sure their IT person and if applicable, the HR people are part of all conversations to assure a smooth transition.

  • As with any outsourced project, the measure of how smooth or rough the process will be, depends greatly on the set up, selecting the right vendor and troubleshooting before the actual transition is made.  Kathleen M. Egan CPA PLLC provides seemless payroll services which include but is not limited to All payroll functions for weekly, biweekly, monthly and special payrolls
  • Quarterly and year-end reports as required by IRS and state
  • W2s, 1099s
  • Direct deposit, electronic tax payments at no extra charge

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