Payroll outsourcing among small- and mid-sized companies is as popular as it’s ever been. Still, it is not uncommon for new businesses to start out doing payroll in house. That’s okay when things are new and still fairly manageable. As a business grows though, payroll needs may become so demanding that ownership has no other choice but to either hire a payroll specialist or outsource the job.
Payroll outsource providers come in all shapes and sizes. BenefitMall, a company based in Dallas, is one example of a payroll provider that also offers benefits administration and limited HR services. They say there are four signs that suggest it is time for a business to outsource its payroll.
1. The Bookkeeper is Overwhelmed
Bookkeepers are very good at what they do: keeping the books. The thing is that bookkeepers are not payroll specialists. They haven’t been trained in payroll; they generally aren’t familiar with payroll law; they don’t tend to keep up with changes at either the state or federal level. Bookkeepers can eventually be overwhelmed by payroll as a company grows.
How is your bookkeeper doing? Is she pulling her hair out every Friday trying to get hours calculated and data input into the system? Does running payroll every couple of weeks take an excessive amount of her time? Does she complain that payroll is getting in the way of doing more important things? If the answer to any of these questions is ‘yes’, it is time to start looking seriously at relieving your bookkeeper of payroll responsibilities.
2. Payroll Mistakes Are Common
As a company grows, payroll becomes more complex. Constantly evolving federal and state regulations only make that complexity worse. The end result for many small businesses is that payroll mistakes become commonplace. Hours are regularly miscalculated, overtime is paid incorrectly, and so forth. If mistakes include tax issues, they could end up costing a good deal of money by way of penalties and interest.
Note that frequent payroll mistakes can also be the result of an outdated payroll system. Legacy software just might not be keeping up with all the complexities of modern payroll. And if the software doesn’t work right, mistakes are always a risk.
3. On the Verge of Explosive Growth
Growth is good. However, exploding growth – as opposed to gradual growth – can quickly overwhelm both payroll and HR. Suddenly they start feeling the pressure to get more people hired and on the payroll. And once on board, all of those new workers have to be integrated into the system. That says nothing of running a larger weekly payroll with all of the additional hires to account for.
4. Ownership Wants to Save Money
Unless a company is a payroll specialist like BenefitMall, payroll is not what they do. Therefore, they are likely not as cost-effective and efficient as a specialist provider. Their inefficiency is likely causing them to spend too much money on payroll processing. Outsourcing is the solution inasmuch as it saves money.
When you account for all the factors that go into building a new computer network, a professional IT provider can do the job faster and less expensive than a payroll company trying to do it themselves. The opposite is also true. The payroll company can do the IT provider’s payroll faster and cheaper than they can do it in-house.
There is a reason the majority of America’s employers utilize outsourced payroll. If your company does not, perhaps it is time to step back and ask why. Outsourcing may be just what your company needs right now.