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Why Outsource Payroll as a Freelancer? 5 Important Questions for Your Gig-Based Business

To determine if outsourcing to a payroll provider could benefit your freelance business, consider the following questions.
freelancers outsourcing payroll

With the gig economy booming, more individuals are opting to provide gig-based services in addition to another job, or as their sole means of income. If you are a solopreneur, you may be asking yourself, "Why outsource payroll when I have a freelance business?"

In addition to the traditional benefits that a payroll provider can offer, many payroll companies are quickly adapting to the gig-economy trend and developing services designed to benefit freelancers, even when they are operating solo. To determine if outsourcing to a payroll provider could benefit your freelance business, consider the following five questions.

Do you have any employees or subcontractors?

Although this may be an obvious question a business owner asks when deciding whether to outsource payroll, it can also be overlooked. Once you take on your first worker, you need to make sure that they are paid accurately and on time.

However, you must track all funds paid to anyone in the normal operation of your business, not just traditional employees. If you frequently use subcontractors or other freelance providers to fulfill your obligations to your clients, it’s important to track what they are paid every payroll.

freelance taxes

How many clients do you have?




If you provide a one-time service to a client, a payroll provider may not be warranted. But if your freelance business provides ongoing services to clients, it may be time to consider working with a payroll provider that offers an easy online accounting software that integrates with their payroll services. For tax purposes, each revenue stream, or each individual client, must be tracked separately and will likely issue you a Form 1099 at the end of the tax year. For example, if you provided eight small projects per month for each of five clients, at the end of the year that would equate to 480 projects that must be individually tracked, invoiced, and expensed. A reputable payroll provider offers online accounting software to help you track your invoicing and expenses, versus spending time handling this paperwork on your own.


online accounting software


Are you calculating taxes accurately?




As a freelancer, your taxes can be complicated, even if you are operating with no employees. Your tax situation can become even more challenging if you are still working as a full-time employee while trying to grow gig-based revenue streams.




Failing to navigate the maze of self-employment payroll taxes can be costly. Even if you file your taxes on time, the federal government is well within its rights to assess added fees and penalties for under-reporting your income. You'll also need to be aware of changes to self-employment tax regulations. Of course, if you'd rather not shoulder this responsibility alone, outsourcing your tax payment and filing to a payroll provider can help you save many hours that are often required to make meticulous tax calculations.




Do you know, in detail, how you are spending your time?




As you jump from project to project throughout the day, tracking your time for gig work may not seem necessary. However, efficient time tracking is essential to gig-based businesses. Many freelancers tend to shortchange themselves by underestimating their value and the time required to complete a project. But if you do this for too long, you could be out of business.




Fortunately, outsourcing your payroll can help with this issue. Reputable payroll services offer time and attendance tracking that can be accessed via mobile platforms. This allows you to track time spent on projects in the moment and with little effort.




Are you responsible for providing your own insurance?




As your business grows, your insurance needs could grow and change as well. While some freelancers can secure health insurance through a spouse's employer’s plan, not everyone will have this option. In addition to health benefits, you'll also need to consider insurance policies that protect your business assets, provide liability coverage, and cover any employees you have if they get injured on the job. A payroll provider that has secure data-sharing relationships with major benefits carriers can help make this task easier when the time comes to think about your insurance needs.




By considering these five questions, you can better determine why outsourcing payroll might be beneficial for your business. Comprehensive payroll service providers, like Paychex, can offer customized small business solutions that provide myriad benefits to freelancers in a growing gig economy.




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* This content is for educational purposes only, is not intended to provide specific legal advice, and should not be used as a substitute for the legal advice of a qualified attorney or other professional. The information may not reflect the most current legal developments, may be changed without notice and is not guaranteed to be complete, correct, or up-to-date.

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