The 5 Most Essential Benefits of Outsourcing Payroll

January 27, 2017 Zuman

In recent years, the trend of outsourcing payroll has taken off within HR departments across the country. Per a 2014 survey from Robert Half and Financial Executives Research Foundation, 47 percent of companies outsource at least some component of their payroll operations. While the reasons differ - some companies want the added layer of security, while others need help with compliance issues - they all reap the many benefits that outsourcing has to offer. Here are five such advantages your company might experience:

1. Cut Costs
Perhaps the most obvious benefit of outsourcing payroll is that you can greatly cut costs. According to a CNN Money report, payroll and its various fees and taxes can add up quickly. While an employee may make only $70,000 per year, that can add up to $88,000 for employers, which includes Medicare tax, unemployment insurance and Social Security, among others.

By comparison, a payroll service might only run between $25 and $200 per month, according to the Houston Chronicle. Cloud-based platforms and other software solutions can work out to be even less expensive in the long run.

2. Reduce Workload
Saving money is important, but just as vital for many employers is the added time that outsourcing opens up. As a whole, payroll can be a time-consuming issue, and streamlining this process affords managers and executives the space in their day to facilitate employee engagement and plan ongoing training. Plus, not having to worry about handling payroll every day can remove a huge burden from the shoulders of the HR department.

Fewer headaches means more energy and inspiration to tackle some of those other projects, like focusing more on companywide strategic growth.

3. Added Amenities 
When you work alongside a third-party outsourcing service, you won't just have access to payroll functions. Depending on the service you sign up with, you may get other value-added services, including everything from bookkeeping and help with labor law compliance to expanded health benefits and contract generation.

These new services expand the capabilities of the entire company, which has the added bonus of increasing the scope and performance of a given organization. Plus, a company can customize services for its specific goals and needs.

4. Avoid IRS Penalties 
According to estimates from the IRS, issues with payroll can prove costly to businesses of all sizes. Over 40 percent of small businesses in the U.S., for example, end up paying upwards of $845 in fees each year due to improper filings or issues with payments.

These aren't just costly from a financial standpoint. Addressing these filing mistakes can also eat up valuable time and eventually lead to audits, which can be troublesome for some businesses. Outsourcing ensures things are properly cataloged and filed before deadlines.

5. Improve Employee Satisfaction 
Outsourcing is about placing the important duty of managing payroll in the hands of experts. It's more than just saving time, avoiding needless headaches or even streamlining efforts; having this level of help can put executives and their employees at ease.

When a company knows payroll is being handled by a service with insight and experience, especially one that relies on new technologies and software platforms, that keeps people feeling better connected to their jobs. Ultimately,  that will only help businesses excel in their industry.


About the Author


Zuman is the premium solution for HR, payroll, benefits administration delivering superior control, lower risk, and enhanced employee engagement for growing companies.

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