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Outsource payroll: Top 4 things to Consider

May 28, 2014 | posted by Ren Cicalese

Consider These Four Key Areas When Making Your Decision to Outsource Payroll.

Ask almost any business owner and they’ll agree there simply aren’t enough hours in the day to manage daily business operations, customers, employees and still actually do the work you’re in business to do.  One way to tackle the overload is to outsource key business functions like payroll. For most small businesses, the time, money and stress relief that comes from outsourcing payroll far outweigh the very reasonable costs.


When Can Outsourcing Payroll Be A Good Thing?

Keeping on top of your payroll is a demanding and detail-oriented task and most business owners probably do not realize how much of their time is taken up by it each month. The benefits of outsourcing payroll are:

  • Avoiding the ire of the IRS – No matter how big or small your business is, the IRS will not cut you any slack if you do not file your payroll taxes correctly.  A trusted payroll provider can be of great help to ensure that you meet your deadlines and make accurate, timely deposits.
  • It’s more cost-effective – This depends on the size of your business, but outsourcing will most likely be more cost-effective than hiring a salaried employee, and if you’re currently processing your own payroll, you will save yourself time, money and aggravation.
  • Perks like direct deposit – Offering employees direct deposit as part of an outsourced payroll solution can add a valuable employee perk for a small business. A payroll service can help by taking over the time required to check and reconcile everything at the end of each pay run.
  • Expert advice from experienced payroll specialists –Regulations, forms and tax rates are subject to change and keeping up to date with these changes can prove unmanageable to a small business owner. Payroll specialists have the experience and tax knowledge to keep you informed and your business compliant.


See how much it costs to outsource your payroll to Abacus Payroll


When Should I Outsource Payroll?

The day you hire your first employee can be the right time to outsource payroll. But here are a few additional questions to ask if you’re on the fence about outsourcing:

  • Are you struggling to keep up with important deadlines? Consider outsourcing your payroll functions if you’ve been hit with costly penalties because your payroll tax deposits weren’t on time.
  • Are you concerned if you’re applying the right tax rates and deductions? It can be a full-time job to stay on top of all the correct rates and deductions needed and incorrect calculations can lead to unnecessary expenses in the form of additional costly penalties.
  • Is your workforce growing?  Compare the time and effort you spend calculating payroll to the plans offered by a number of payroll bureaus and you’ll most likely see that you can save money by outsourcing to a payroll provider.
  • Is it close to a quarter or year-end?  When switching providers or signing up for the first time, you will have to transfer all of your company’s the year-to-date payroll data. It may be less work and less of a hassle for you if you plan to start by January 1st or by the start of the next quarter.


How Do I Go About Finding the Right Payroll Provider?

A good start is to ask your close business contacts for who they use to process payroll.  Make a list of the things you need assistance with and the most frequent problems you encounter and it will help you narrow down to a provider that will resolve these specific issues. Key questions to ask prospective service providers are:

  • What kind of experience and qualifications does the payroll service have– How long have they been in business? Which associations are they recognized by? What licenses and accreditations do they hold? Are they experienced in your industry and/or region?
  • What is the promised level of service? – Will you have the same account representative every time? How quickly will they respond to you? How readily and easily can you communicate with them?
  • What kind of payroll tax service do they offer? – Running payroll is one thing and sometimes taxes can be a completely different component. Discuss if their payroll service includes offerings such as payroll tax filings each pay period, local tax filings, and EFTPS payments on your behalf. Also ask how they handle penalties in the event of incorrect filings.
  • What is the total cost? –Get a clear picture up front so that you are not surprised with any hidden “nickel and diming” down the line. Payroll can start as low as $4.00 per employee per month, plus fees for extra features or more frequent pay periods. You also want to find out how the payroll provider is charging for annual, quarterly, and per pay period tax filing services.
  • Will your company’s payroll information be secure? – Ask how sensitive payroll data is delivered to the provider each pay period. Is the method secure? Is their online data entry protected?  Make sure you feel confident that they are looking out for your best interest.
  • What do their current clients say about them? To get a true picture about the payroll provider’s service, ask the people with firsthand experience. Any good payroll service will always be able to provide references and contact details and if they don’t, alarm bells should start ringing. A sign of a good, reliable payroll service is if a currently client has been with a provider for a long time, so be sure to find this out.


As An Employer You Are Responsible For Getting Things Right

Hiring a payroll provider does not waive you of your employer tax responsibilities. While a provider can offer to take care of everything, if they make a mistake, it is ultimately you the business owner who will be held responsible.  Understand your tax liabilities and deadlines and keep a close eye on your provider to confirm they are making your federal, state and local tax deposits on time.  If they’re not, the IRS will be coming after you to pay the penalties and interest.

Contact Ren on 856 667 6225 or by Email if you would like more information about outsourcing your payroll.


About the Author: Ren Cicalese

Ren is the managing shareholder of Abacus Payroll and the Alloy Silverstein Group. He is only one of 5,000 CPA’s in the US who is a certified Personal Financial Specialist (PFS). He has extensive accounting and financial management experience and works with law firms, real estate developers, computer consulting businesses, healthcare professionals, manufacturing companies, retail and wholesale organizations and professional athletes. Contact Ren on (856) 667-6225 or Email if you’d like more information about outsourcing your payroll.