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How to outsource your payroll...and get back to doing what you love

Published December 21, 2020

Free up time spent on the mundane, and get your engine fired up!

It’s almost 2 am on a Saturday night. You’re holed up in that crevice in the back of your restaurant that you call your office. Your last patron left hours ago, but you barely had time to talk to your loyal customers today. And you’ve been trying all evening to make sense of this payroll software you’ve just downloaded and all the stuff your accountant sent over, with no luck. You bury your hand in your face and exhale deeply. A single ominous question bounces around in your head: When will I ever be able to get back to doing more of what I love?

If you own a restaurant or a retail store, payroll processing probably wasn’t part of your inspiration for starting your business. Your passion for what you create and serving the great people in your community fuels the fire within you. Doing payroll likely douses your internal flame quicker than that fire extinguisher hanging on the wall.

So, what’s a frustrated business owner to do? Outsourcing payroll may be an ideal option.

If you’re not an expert on payroll, taxes and regulations, it’s not easy to avoid fines resulting from tax filing or compliance errors.

Pros and cons of outsourcing payroll for your business

As with many business decisions you’ve made, you’ll want to look at the pros and cons of outsourcing your payroll. And, if you’re struggling with the payroll process consistently, consider these advantages:

  • Avoid costly mistakes and penalties: If you’re not an expert on payroll, taxes and regulations, it’s not easy to avoid fines resulting from tax filing or compliance errors. Payroll outsourcing assures that your employees will get the accurate pay they deserve and that your business will be less vulnerable to penalties and fines.
  • Benefit from automation: Top payroll processing companies today use cloud-based online payroll software and tools modeled after proven processes and workflow. And online payroll is done faster and more efficiently, so you have more time for your customers. Besides easy-to-use payroll software, top payroll companies offer payroll cards as a streamlined—and greener—alternative to paper check and payslipspay slips.
  • Leverage payroll best practices: You’ll have more peace of mind knowing that your outsourced payroll is covering all the bases. From payroll tax to regulations and more, you’ll have access to professionals who can ensure trouble-free payroll compliance.
  • Empower self-service: Leading payroll processing companies offer online payroll options that make it easy for you and your employees to make changes. Self-service is usually done by accessing a secure online payroll portal.
  • It’s cost-effective: Doing your own payroll management requires a huge investment of time. And, an in-house payroll system can be cost-prohibitive to many small businesses, too. So, payroll outsourcing may be a much better option in terms of time and money savings.

But, what about the potential drawbacks to payroll outsourcing? You may have concerns about employee information security and confidentiality confidentially, especially if you’ll be entering information online. Payroll outsourcing may leave you worried about delayed responses, hard-to-use payroll software, lack of personal service, or additional surcharges and expenses. 

How payroll outsourcing works

While every payroll company is different in terms of how customers are introduced to and their systems set up with their payroll software, they all need to transfer information.

Like any HR outsourcing endeavor, you’ll be providing basic information to get set up in their payroll software or online payroll system. From there, you’ll provide payroll information about employees, salaries, hours, vacation and benefits policies—essentially all the data needed to make your payroll automatic, accurate and always on time.

How you’ll enable (keeping in mind that they do the work, you make the decisions) ongoing or regular changes to your payroll cycle, again, vary by the payroll outsourcing service. Still, leading companies offer secure and convenient self-service options for yourself and your employees. Of course, all changes to your payroll must be approved by you.

Going forward, any details regarding compliance, reporting and tax considerations should be managed by the experts at your payroll service on an ongoing basis, sparing you significant time spent on these complex variables. Best of all, you’ll gain the relief of knowing you’ll avoid costly penalties or fines when your payroll is closely managed by your provider. 

For many small business owners strapped for time, managing payroll through a vendor can be a welcome reprieve.

What to look for in a top payroll service provider

Once you’ve decided on payroll outsourcing, the next task is to find the right one for your business. Your choice will greatly depend on whether your enterprise is a small business with a few employees or a larger enterprise with a bigger workforce. What matters is that you land on the right payroll provider for your unique business.

You can start your search by asking fellow business owners—ideally with an operation type and size similar to yours—about their experience with their payroll provider. Do your homework and look for reviews, especially on how easy or hard the payroll software is to learn and use (and how easily it integrates with your current systems). Narrow your list to reputable companies that have been in business for a long time, especially providers who will know your market and have built a strong reputation for delivering value.

Once you’ve completed your checklist and created a short list of payroll service candidates, there are a few questions to consider:

Does the payroll service offer personalized service? In a 2019 EY Global Payroll Survey, 32 percent of respondents found it difficult to conduct business with their payroll service. That’s why it’s crucial to find a vendor with a reputation for providing personalized service. Find out if you are assigned a dedicated representative. You want to be able to talk to a real person that can help you resolve issues and ensure you get the value you deserve.

Does the payroll service offer a self-service model? In that same EY survey, online payroll self-service was the number one criteria respondents cited when choosing a time, attendance and workforce management system. Payroll outsourcing self-service functionality is increasingly important as businesses look to technology and payroll software for convenience and robust capabilities. For instance, with self-service access, employees can easily and quickly make direct deposit changes if they switched banks.

Is the payroll software cloud-based, and is it easy to use? You’ve likely decided on payroll outsourcing because you don’t have the time or inclination to deal with complex tasks and processes. So, the last thing you want is payroll software or an online payroll system that makes your brain hurt every time you have to input something or make a change. Ask for a demo of the payroll software to make sure it’s intuitive and easy-to-use. Look for a secure, cloud-based payroll software solution that offers a cost-effective pricing model and access from any digital device. Inquire about technical support too.

Steps to outsourcing payroll

Once you’ve made your payroll outsourcing choice, you need to take all the right steps to set yourself up for success.

Consider timing: It’s easier and cleaner to do payroll outsourcing at the beginning of the year for tax filing purposes, but the switch can be made at the beginning of a quarter or pay period as well.

Work with your dedicated representative on a start date: Decide what’s practical for your business in terms of the time you’ll need to supply all your payroll information and find out how long the conversion will take.

Commence the data dump: You’ll need to provide your new payroll service with the financial and employee information and paperwork they need. They’ll use this data to set up a profile and get you into their payroll software or online payroll system, as well as putting any direct deposit processes in place.

Make sure legal stuff is handled: Consult with your dedicated representative to ensure all the necessary legal paperwork is done (such as a signed power of attorney) as well as any IRS or state forms.

Get your secure credentials set up: Top vendors today safeguard online payroll data using cybersecurity best practices, such as two-factor authentication. But, your payroll vendor should balance the need for security with making it easy for you and your staff to gain access to their system.  

Inform and educate your team: Leverage any educational materials or tutorials from your payroll provider to train any employee who may need to use self-service options, and the payroll software or online payroll system. Also, inform your staff of any payroll cycle changes due to the switch, such as a change in pay date (if necessary).

For many small business owners strapped for time, managing payroll through a vendor can be a welcome reprieve. Switching from in-house to a company that does payroll processing for you and handles all those nagging tax and legal issues can be a smart move that helps you get back to what you love: running your business and serving your customers. 

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