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5 Reasons Outsourcing Payroll Should Be in Your 2018 Business Plan

Payroll
Article
02/17/2018

If you're handling your own payroll, you could be creating unnecessary work for yourself—and subjecting your process to avoidable errors. From setting up tax records to ensuring that filings and payments are made on time, payroll is a time-intensive, heavily detailed part of business administration. A small mistake may lead to costly penalties and fines, as well as possibly creating employer/employee strain. Here's a closer look at the mistakes you may make when you're handling DIY payroll—and why it may be time to consider outsourcing payroll.

payroll is time-intensive, heavily detailed part of business administration
  1. Most Small Business Owners Don’t Have a Detailed Understanding of Payroll Requirements

Most payroll companies will provide you with a package of information on what is required for setting employees up in the payroll system. Many also assist with required new hire reporting. Each step in this process—from setting up your company's payment system to ensuring each employee has been entered in the system correctly—requires a detailed understanding of payroll requirements.

  1. Taxes Are Complex to Set Up and Maintain

The challenges of taxes don't stop with employee onboarding and payroll setup. If you're going to take the DIY payroll approach, it's important to pay and report on your taxes both correctly and in a timely manner.

However, understanding employee deductions for federal, state, and local taxes—as well as programs like Social Security and Medicare—can be challenging. These taxes must be set up correctly before employees are initially paid.

When you pay employees, you also have to handle tax filings and payments of employee withholdings and employment tax for the company as a whole. Payments may be due quarterly—or even shortly after each payroll. Falling behind, or filing and paying incorrectly, can create administrative headaches and lead to penalties and interest charges.

  1. Managing Employee Benefits Can Be Stressful and Complicated

Many companies offer an array of benefits to their employees, and employee contributions must be deducted from payroll. Often, this is complex. For example, your company may offer multiple healthcare plans; each with different employee contributions. Those contributions are further impacted by an employee’s status (are they single, married, or do they have dependents?), as well as their salary level.

These calculations may need to be done across multiple types of benefits: health insurance, dental insurance, retirement contributions, life insurance, and more. Outsourcing payroll helps ensure that your deductions are aligned, that what you're offering complies with regulatory guidelines, and that payments to providers are sent on time to avoid interrupted benefits coverage.

understanding employee tax deductions can be challenging
  1. Payroll Mistakes Are Costly and Negatively Impact Employee Morale

There are few things more frustrating to employees than payroll errors. For example, a mistake in state tax deductions can require an unexpectedly sizable tax deduction from an employee's final paycheck of the year, at a time that coincides with the holidays. Payroll mistakes can negatively affect your employees and result in employer/employee strain.

  1. Outsourcing Payroll Gives You More Time to Do What You Do Best

Unless you’re in the payroll business yourself, getting your payroll right will take a significant amount of time away from doing what you do best. Yet payroll is critical to both keeping your employees happy and staying compliant with federal, state, and local tax laws. Outsourcing payroll (and payroll taxes) is one strategy that can help companies maintain compliance and frees up your human capital to get more accomplished.

This website contains articles posted for informational and educational value. Paychex is not responsible for information contained within any of these materials. Any opinions expressed within materials are not necessarily the opinion of, or supported by, Paychex. The information in these materials should not be considered legal or accounting advice, and it should not substitute for legal, accounting, and other professional advice where the facts and circumstances warrant.
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