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Posted On: 04/24/2024 / Payroll Services
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Home » Resources » Blog » Should a Business Outsource Payroll?

Switching from in-house payroll to an outsourced payroll service can seem intimidating. After all, you and your employees depend on payroll to be done accurately, on time, and with an eye for long-term growth. However, this is actually why a business should outsource payroll – making this move can help achieve unprecedented changes that allow you to save time and money while reducing stress.

In this piece, we’ll cover:

  • In-house payroll vs. outsourcing
  • Why should a business outsource payroll?
  • How to outsource your small business payroll
  • Choosing an outsourced payroll service

Armed with this knowledge, you’ll be able to make the best payroll decision for your small business.

Why Should Small Businesses Outsource Payroll?

If someone told you that you could snap your fingers to save time, give you more money to work with, and reduce your stress in your business, it would be a no-brainer. This is typically what outsourcing payroll can do for a small business owner – but instead of snapping your fingers, you need to find a reliable payroll provider to work with.

Much of the results aren’t instantaneous, but outsourcing payroll has numerous short and long-term benefits that can allow you to optimize your business for growth.

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In-House Payroll vs. Outsourcing

One of the biggest hurdles to get over when deciding to outsource your payroll is considering the pros and cons of working with a third-party payroll service. Let’s compare them side-by-side:

Related: In-House Payroll vs Outsourcing: How to Decide

In-House Payroll:

  • Time Consuming
    Most small businesses do not have a true CFO or a dedicated accounting team. This means that whoever runs payroll will probably not have proper training or will be doing it alongside another job.
  • Creates In-House HR Needs
    If you are running your small business payroll, you will also have to address the HR needs that accompany it. These include policy changes, data privacy, and employee grievances should payroll be done incorrectly.
  • CostlyIn addition to paying an employee or employees for data collection and input, you have to distribute paychecks and pay stubs, deal with reporting, and correct any errors you might have made.

Outsourced Payroll:

  • Time-Efficient
    Once you have set up your payroll process parameters, they will be able to onboard new employees, aggregate data for pay periods and reporting, and distribute checks and pay stubs.
    Read More: The Benefits of Managing Your Payroll Online
  • Elevated Security and Compliance
    Sensitive data needs to be collected and stored properly. In addition to needing these records for tax purposes and audits, it can be extremely costly if your data storage is compromised – and you can be fined for not storing it properly. Third-party payroll companies go through extensive lengths to aggregate and house your information using professional resources.
  • You can Focus On Your Business
    In addition to the time reduction element, outsourcing your payroll will take away stress from you, your in-house payroll manager, and employees who have to deal with small mistakes from a less-efficient system. Removing this cloud of confusion will let you focus on developing your team and product to scale your business.
  • Expertise
    Not only are payroll companies composed of financial experts, but they are also trained in tax law, accounting, HR, and other facets of payroll that your small business employees likely are not. Because third-party providers work all day, every day on payroll solutions, they will also always be focused on learning the latest laws and finding the best solutions to common issues.
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Is Outsourcing Payroll Cost-Effective?

Even the most basic math supports outsourcing payroll as being cost-effective for small businesses with multiple employees. The cost of payroll software, storage, and the hours it takes to aggregate data and file taxes is typically more than an outsourced provider.

Once you start learning the data behind loss-prevention, employee retention numbers, and other long-term compliance metrics, it becomes clear how much money your business can save by outsourcing. If you are still feeling unsure about taking the next step, determine your current in-house payroll cost and then get a quote from an outsourced payroll provider – the numbers might shock you.

How Much Does Outsourced Payroll Cost?

Outsourcing payroll costs will be based on your employee count, payroll needs, and other resources included in the service. There is no set price, but you can get extremely accurate estimates up-front from high-quality providers.

You should be able to quantify several tangible savings that come from switching payroll out-of-house – but there is also a significant benefit to the morale and reduced burden that you and your staff will have. With the right provider, outsourcing your payroll is like having your cake and eating it, too.

Get the Best Payroll Service in Arizona with Paytech

At Paytech, we pride ourselves on having the best small business payroll solutions in Arizona. This means being timely, accurate, and dedicated to providing expertise and resources that help build your business. We know it can be daunting to switch your in-house payroll process, but we’re committed to helping you every step of the way.

Automating your payroll is a great way to start if you want to elevate your business to the next level. Reach out to us today to schedule a free consultation and see how we can partner for a brighter future.