Payroll is not a core function of the average small or midsized business. Time spent on payroll, usually by someone who is not a payroll specialist, is time taken away from tasks that drive revenue. Even if you invest in software to automate certain tasks, someone still must oversee and monitor payroll.

The general outsourcing value proposition applies here. Outsourcing payroll is more cost-efficient than hiring a full-time employee. You pay only for the services you need for a predictable monthly fee. Instead of having payroll drag down productivity, outsourcing payroll ensures that the work is done accurately according to best practices, and all deadlines will be met.

However, there are advantages to outsourcing that are specific to payroll, as well as painful consequences of poor payroll management. Let’s discuss.

Navigating Complex Payroll Rules and Laws

Payroll is so much more than paying your employees. There is a tremendous amount of nuance to payroll rules and laws, which often vary from state to state, county to county, and even town to town. Withholding amounts, frequency of filings, unemployment, benefits, taxes, and other components fall under the umbrella of payroll.

Understanding and staying up to speed on constantly evolving payroll rules and laws, and applying them correctly and consistently, are best left to a professional with specialized knowledge and software designed for this specific purpose.

Satisfying Compliance Requirements

Failure to comply with complex federal, state, and local payroll rules can lead to hefty fines and time-consuming, resource-intensive audits. Noncompliance can also damage your reputation in the eyes of customers, business partners, and vendors.

Beyond regulatory headaches, meeting compliance requirements will show employees that they’re being paid the correct amount on time. It shows you value their contributions and want to treat them fairly. Conversely, payroll noncompliance can have a negative impact on employee satisfaction and even lead to higher turnover.

Payroll Software Often Includes Additional Functions and Reporting

When you outsource payroll, your provider is likely to set up your company with payroll software. Did you know payroll software often includes many other HR and accounting capabilities and specialized reporting functionality?

For example, some payroll software providers created reporting during the pandemic to help companies meet PPP application and loan forgiveness requirements. Instead of duct-taping this information together at the last minute and hoping for the best, companies that were using payroll software were better prepared to secure the funding they needed.

Payroll software may feature expense management, benefits administration, labor cost analysis, and other functionality and can often be integrated with popular accounting software platforms. These capabilities can create efficiencies in other areas of your organization and enable you to maintain control and visibility into your data through a self-service portal.

Payroll doesn’t have to be scary, whether you’ve been running payroll for years or are planning to get started. Outsourcing payroll to a reputable provider and implementing user-friendly payroll software can help you keep regulators and your employees happy while removing highly complex tasks and reporting from your plate!