Boost Your Bottom Line: Why Outsourcing Payroll Makes Financial Sense

In this handy guide, we'll run through all the advantages of outsourcing payroll services and provide all the info you need to make a seamless switch to a better way of getting your people paid.

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Author By the Roll Editorial Team on December 13, 2023
Reading Time 5 min read

No matter how well your small business is doing, it’s normal for owners and managers who process payroll manually to approach each pay cycle with a sense of apprehension – and maybe even a teensy bit of foreboding.

And you know what? That’s totally understandable. All that number crunching, switching between clunky spreadsheets, and cross-checking data? That’s not what you started your business for. And, let’s face it, it’s hardly a high-octane thrill!

That's exactly where the beauty of outsourcing payroll comes in. It's becoming a go-to solution for small businesses like yours looking for an efficient, accurate, and stress-free way to handle payroll. Outsourcing frees you from time-consuming administrative tasks, allowing you to focus more on the exciting aspects of running your business and less on the tedious details of payroll processing.

Wondering whether it's the right move for your business? In this handy guide, we’ll run through all the advantages of outsourcing payroll services and provide all the info you need to make a seamless switch to a better way of getting your people paid.

What Does It Mean to Outsource Payroll?

As the name suggests, outsourcing payroll refers to the practice of hiring a third party to shoulder the responsibility of processing your worker’s salaries.

But that’s not always quite as simple as it sounds. Why? Because there’s a lot more to the process than tallying up the hours a freelancer has worked or dividing a full-time employee’s salary to determine their monthly, bi-monthly, or weekly wages. The number of additional considerations can be extensive and typically include:

  • Tracking time and attendance
  • Checking paid time off (PTO) entitlements
  • Calculating bonuses and commission payments
  • Accounting for benefits and other deductions
  • Withholding federal, state, and local taxes

Plus, regardless of whether you’re conducting payroll for independent contractors or a team of W2 employees, it’s not just the individual workers you need to pay. You’ll also need to collaborate and communicate directly with the relevant tax agencies and benefits providers.

Considering all of those intricacies, it’s little wonder many small businesses choose to focus primarily on core business operations and outsource admin-heavy payroll tasks to an external service provider.

The Benefits of Outsourcing Payroll Services

Why outsource payroll processing services? Lack of administrative resources or expertise to confidently run payroll are two of the most commonly cited reasons. And both are perfectly valid. However, there are several additional benefits to consider, too.

Save Valuable Time

Freeing up additional time to focus on growing your business is one of the primary advantages of outsourcing payroll services. Small business owners and managers have many hats to wear. And when accounting and payroll processing isn’t one of them, you can redirect the many hours you’d spent on payroll management toward other initiatives like:

  • Product development
  • Staff training
  • Sales plans
  • Expanding market reach
  • Nurturing client relationships

Focusing on these efforts often leads to accelerated growth and a more agile business model.

Compliance Help

Regulatory compliance can sometimes feel like a constantly changing jigsaw puzzle. You get one section nicely completed. But just as you get into your stride, something changes, and it feels impossible to fit all the remaining pieces together cohesively. Sound familiar?

Outsourcing payroll mitigates this frustration and, along with it, the risk of penalties and legal troubles. Professional payroll services act as compliance puzzle masters, constantly staying one step ahead of evolving tax regulations and employment laws to help you make sure all your i’s are dotted and t’s crossed.

Reduce Costs

When pondering the question, "What are the pros and cons of outsourcing payroll?" and considering the advantages and disadvantages of outsourcing payroll services for your business, it's common to initially view the cost as a potential drawback. However, a closer examination often reveals that investing in third-party payroll services is actually a cost-saving strategy, which should be counted as a significant advantage.

Why? Let’s break it down.

Picture this: No in-house payroll department is needed, meaning you don't need a budget for additional admin staff salaries. Plus, you can skip all the staff training costs, and no expensive software licenses are required. In fact, there’s no need for hefty infrastructure or overheads at all. So, in reality, outsourcing payroll often serves as a cost-cutting measure, allowing businesses with limited resources to allocate funds where they’re most needed.

Increase Payroll Accuracy

Numbers matter, especially when it comes to paychecks. Just one pesky input error or accidental oversight can result in disgruntled staff, headaches trying to correct employee paychecks after the fact, and stressful hours spent recalculating and resubmitting tax and benefits documentation to the relevant parties.

Payroll service providers bring specialized tools and expertise to the table, automating manual data entry tasks and significantly reducing the risk of calculation errors. The result? Happier employees, better relationships with benefits providers, and way less heat when it comes to the pressure of getting tax deductions right.

Enhance Security of Data

You’ve probably already asked yourself, “What are the risks associated with payroll outsourcing?” But perhaps you haven’t yet stopped to think about the risks of not outsourcing payroll. When it comes to data security, that’s an essential consideration.

In today’s digital age, data is currency, and keeping sensitive employee information confidential and financial details shielded from potential cyber breaches is a vital aspect of doing business. When you outsource payroll to a reputable provider, you invest in robust security measures and protocols that act as a digital fortress, helping to safeguard your most critical data assets. 

Faster Pay

Timely paychecks are not just appreciated; they are essential. Like most people, your team has financial commitments such as rent, mortgage, and various household expenses. Many also have dependents relying on them. Prompt and accurate payroll reflects your commitment to their well-being, significantly reducing stress. Consistent delays in salary disbursement can lead to talent attrition as employees seek more dependable employers.

Outsourced payroll services are more than a solution to this challenge. They represent a commitment to operational excellence, so every team member receives their well-deserved earnings without delay. This approach is about more than just efficiency; it's about building trust, enhancing morale, and fostering a workplace culture where employee satisfaction and retention are not just goals but realities. This proactive step not only streamlines financial processes but also reinforces the message that your organization values and respects its employees' financial stability and peace of mind.

How Does Outsourcing Payroll Work?

With the basics covered, let’s get down into the nitty gritty and unravel the process step by step to help you prepare for a silky-smooth transition.

Find the Right Payroll Company

Should a small business outsource payroll to just any old provider? Of course not. If you’re going to orchestrate payroll like a well-rehearsed symphony, you need the right conductor! So, how do you choose the right company to partner with? Here’s a list of the top three essential features to look for:

  1. Integrated data – With a payroll system that can be fully integrated with time and attendance, benefits, and other HR applications, you can access all the information you need quickly and efficiently through a single sign-on.
  2. Intelligent assistanceGenerative AI-powered chat-based assistance facilitates query resolution 24/7 and provides technical support by guiding users through problem-solving steps and providing links to relevant resources.
  3. Expertise and reliability – This one’s a no-brainer. Because, let’s face it, if you hand over a heap of valuable employee information and company data, trust is non-negotiable. You want to know it’s in safe hands.

Provide Information

Precisely, what information will your outsourced payroll provider of choice need? In short, pretty much anything related to time tracking, benefits, deductions, and making employee payments. Typically, that will encompass:

  • I-9 forms for every staff member
  • W-4 tax forms for full-time staff
  • W-9 tax forms for independent contractors
  • Any additional state-specific tax forms
  • Employee bank details for direct deposits

Communicate with Employees

Happy, well-informed employees make for a harmonious workplace. So, be sure to let your team in on the new payroll outsourcing plan, address concerns, answer questions, and assure them that their payday plans and priorities are in safe hands. You can even give them advanced access to the employee self-service portal so they can check it out and get involved by inputting/checking all of their details and preferences.

Run Payroll with a Click

With all the set-up and internal comms done, you’re good to go! So, get ready for some seriously speedy processing. The best payroll and tax filing systems need just a few taps or swipes. And voilà! Your payroll’s all done and dusted until the next cycle. We know. Total game changer, right?

Payroll Made Easy with Roll by ADP ®

Looking for a solution that’s super easy to set up, has built-in reminders, gets payroll processed at breakneck speed, and requires no training? Let me introduce you to Roll!

This revolutionary payroll app for small businesses is a completely reimagined way to run payroll and taxes. There’ll be no more laborious form-filling or switching between spreadsheets. Everything can be done in the app through a convenient chat interface, from setting up and adding employees to running a pay cycle.

Ready to roll with a service that takes payroll from a headache to a piece of cake by getting it all prepped, processed, and paid out in under a minute? Check out our pricing packages today. Small business plans start from just $39 per month plus $5 per employee. So when you partner with Roll, outsourcing payroll costs less than you’d spend on lunch! Sign up for your free trial today.

Small Business Payroll • Business Basics • Small Business • Payroll
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