Payroll outsourcing: pros, cons, and how to do it successfully
As with performing payroll functions in-house, applicable taxes must be withheld by the provider before payments are made. With an in-house payroll department, you have to pay your internal team’s salaries, benefits, and payroll taxes. You must also cover training to help your team keep up with the latest tools and trends. By outsourcing all that work to a payroll provider, you save an invaluable amount of time and resources — especially if you’re a small business.
Frequently asked questions about outsourcing payroll
To help keep up with your growing business, you might consider outsourcing payroll to shift some responsibilities off your plate, allowing you to spend time on other crucial business tasks. With Deel’s Global Payroll solution, all of that work and worry is taken off your plate. Run payroll around the world from one platform, streamline international operations, and eliminate the ongoing admin of local compliance, taxes, benefits, and more. Small businesses may benefit from working with a contractor as it’s less costly.
Is outsourcing HR cost-effective?
IRS correspondence is always sent to the primary business, not the third-party provider. You can change your address to the payroll company, but the IRS does not recommend that. If mail is mishandled or responsible parties are not in the office, your firm could be on the hook for their mismanagement.
Payroll outsourcing also enables globally dispersed organizations to save money if they use one global payroll provider. Hiring and paying employees in multiple countries requires more payroll administrators and legal advisors. As mentioned before, these are further areas where a misstep by a payroll outsourcing provider can become a problem for both the provider and the client company. If a company is outsourcing internationally, it shouldn’t assume that it can ignore employment regulations in the provider’s country, as these can be very different from those in the United States. In many cases, companies outsource payroll because they’ve determined it to be more cost-effective than managing payroll in-house. This has historically been one of the main incentives for any kind of outsourcing, and payroll functions are no exception.
Types Of Payroll Services Offered
Payroll service providers only handle making payments to your employees. Some mistakenly believe outsourcing payroll services include HR services that help you hire new people, but HR and payroll outsourcing are different. Human resources can be outsourced to a separate service, and while some companies offer both (like Deel), a payroll company only handles payroll. The terms “payroll service provider” and “payroll services” are often used to apply to either type of organization. We recommend checking out our 2024 guides for the best cheap payroll services, best payroll services for small businesses and best PEO services.
- While different companies will have different criteria for evaluating a good match, they all must ensure a provider maintains adequate protections for employee data and complies with relevant regulations.
- Some companies do it weekly, while others prefer biweekly or monthly.
- You have choices, though, so you can decide what works best for your business.
- You must also cover training to help your team keep up with the latest tools and trends.
The payroll service will likely need access to that information to calculate and deliver payments via payroll checks or direct deposit. If your business is growing, you need a payroll provider that can grow with you. By outsourcing tasks, you can ensure certified public accountant your payroll is getting the attention to detail it requires to run smoothly.
Plus, regardless of whether you’re conducting payroll for independent contractors or a team of W2 employees, it’s not just the individual workers you need to pay. You’ll also need to collaborate and communicate directly with the relevant tax agencies and benefits providers. Finally, the accept payments online 2020 client shares all relevant information the provider needs to complete the payroll functions it will assume. When you hire an outside service to manage payroll, payroll is often their main or even sole activity. By outsourcing payroll, small businesses can save money on the cost of setting up and managing their own payroll system, and then paying an employee such as a payroll specialist to manage it.
Is it just available by email or chat, or will you be able to talk with someone if needed? Consider how the availability of support matches your business needs. Before you do anything, communicate your intention to change with your team. Let them know what’s changing, why you’re doing it, and — most importantly — how it will affect them. On the flip side, going in-house means having more control and customization.
Once the possible cost savings of the practice became clearer, there was no turning back. Reduce costs, manage taxes, administer benefits, and stay globally compliant when you consolidate payroll with Remote. However, if you’re planning to leverage the many benefits of hiring in different countries, what is cost principle you may want to opt for a payroll provider that can easily accommodate that.
