Easy Cost Savings for Small Business: Payroll Outsourcing
Effective July 24th, 2008, the federal minimum wage increases to $7.25. A few small businesses may have needed that reminder- those that process their own employee paychecks will need to make adjustments not just to wages, but to tax withholding amounts, employee savings plans, and other accounts. Businesses that already outsource payroll services don’t need the reminder- their payroll service takes care of these changes for them.
When most people think payroll outsourcing, they think about writing checks and managing direct deposit. Payroll companies do provide these services, but they also do much more. Here are a few of the most commonly used payroll company services:
- provide W-2 and other tax reporting forms
- automatically update wage amounts and tax deductions to comply with regulatory changes
- provide online payroll account access
- allow employees to keep track of sick and vacation days
- calculate employee tax withholding amounts
- compute deposits to employee savings accounts
- project and job cost reporting
Benefits of Outsourcing
Outsourcing payroll is advantageous to small business owners for a few reasons. First, there’s cost savings: payroll companies are able to perform computations faster and more accurately than the average small business owner. Payroll companies also provide experience and expertise. The experts- attorneys, CPAs, and researchers- that work for payroll firms ensure that calculations will be accurate. This helps you avoid fees and penalties that can accompany late filings or errors in tax documentation. Payroll companies also perform time-consuming tasks, like managing employee savings accounts and deferred compensation or employer contribution accounts (cafeteria plans, group term life insurance, and health savings accounts) that most business owners find confusing and tedious. You’ll also avoid worrying about processing payroll when you’re traveling, out of the office, or to busy to crunch the numbers. Outsourcing ensures that payroll processing is done accurately and on time, no matter your workload.
How Outsourcing Works
Payroll processing companies can draw employee paychecks either from your existing bank account, or require that you to set up a “designated account” with their company that they control. You’ll need to provide employee information, such as social security numbers and employment forms (W-4s and I-9s), as well as bank information for direct deposit. You will also need to “call in” or otherwise provide (either online or automatically) employee hours a few days before each payday. The payroll company will need to be notified if employee pay information changes.
Outsourcing Costs
Most payroll companies calculate costs on a per-check or a per-employee basis. Actual costs can vary- they will depend on the length of time between pay periods, the complexity of calculations, the number of employees you have, and the features you choose to offer, such as online access. Make sure you ask vendors for an itemized quote breakdown, and compare several different service offerings before you make your final decision.
November 13th, 2009 at 1:45 am
Payroll processing is a time-consuming process. Outsourcing payroll can save time and can be used to pursue more important value-added and revenue-generating activities.
February 2nd, 2010 at 6:54 pm
Good introductory article. Payroll outsourcing can also provide a company with a host of new technology solutions
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March 5th, 2010 at 1:30 am
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jon
March 10th, 2010 at 2:29 pm
Outsourcing can be very beneficial to small businesses. However there are plenty of in house options available today. Do some research based on your company and choose the right fit.
March 11th, 2010 at 3:49 am
This is a great article. This gives information to those who don’t have any idea on how or what this payroll outsourcing do.
Your article really helps, Betsy!
Phil
April 5th, 2010 at 12:30 am
Payroll outsourcing is indeed an advantage for the small businesses which are in short of people who would do specific jobs. Businessmen could focus on much more important things that would work to their advantage.
April 30th, 2010 at 5:54 am
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johnson
February 1st, 2011 at 11:09 am
Excellent Information- my firm went to onlinepayrollcompanies.com for assistance
February 5th, 2011 at 12:20 pm
This is spacious information. Thanks fitting for sharing.
May 19th, 2011 at 5:16 am
Payroll Services make payroll processing easy with direct deposit, filed & paid taxes, … Small businesses nationwide outsource payroll to payroll services for 3 key reasons: time savings, cost savings, and reduced payroll tax risks. …High performing companies are doing this differently.It is more beneficial to small business.Annie
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