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Outsourcing Payroll vs. Doing It In-House

By: Erin Steiner



When you first started your business, doing the payroll was pretty easy. You paid yourself and maybe one or two employees. You could do the whole shebang in a couple of hours using desktop PC software.

Now, though, your company has grown. Your sales volume has increased, as has your workforce, and you simply don’t have the time to do the payroll yourself anymore. So what do you do? Do you hire someone to do the payroll in-house, or do you outsource it?
The first thing you need to think about is cost. Outsourcing your payroll is much cheaper than hiring someone to do it for you. On average, a small business with 10 to 20 employees will spend only a few thousand dollars each year on outsourced payroll. Hiring a full-time bookkeeper or in-house accountant to do payroll, though, will cost considerably more than that. Can you afford to hire someone—even if you only hire them part-time?
Time is another major factor in your decision. Obviously you do not have the time to do the payroll work yourself. Does someone in your accounting department (which, in most small businesses is just a single person) have the time? When you outsource your payroll, you cut down your in-house duties to just a couple of hours a week (typically all you have to do is verify and send over time card information).
Perhaps the biggest factor in deciding whether or not you should explore payroll outsourcing is trust. The person who does your company’s payroll is going to have access to a plethora of personal and confidential information — about you, about your company, and about all of your employees. Do you trust that person to keep that information to themselves? Do your employees trust that person with their information and details?
Outsourcing companies often have impressive levels of security in place to keep private information private. Not even you would have access to it. Still, do you trust the firewalls and safety measures the payroll company puts in place?
Outsourcing your payroll means sending information out to “faceless” individuals and companies. It’s hard for some business owners to trust an entity they can’t see or talk to face to face. Are you able to trust an “outsider” to keep your business information secure?
It’s also important to be able to trust a person’s (or company’s) accuracy. Payroll is more than adding up hours and cutting a check. It’s about taxes and fees and rules and regulations—details that can and do change often—and if those aren’t seen to correctly, your business could wind up in huge trouble.
Companies that offer payroll outsourcing usually invest in software and subscriptions that help them stay up to date (to the minute) on tax codes, withholding regulations, etc. It’s true that anybody you hire to do payroll in-house would be using software that promises the same thing, but who do you trust more?
Finally, let’s talk for a minute about control. Outsourcing your payroll duties means giving up a certain amount of control over your business. You won’t be able to walk into the payroll person’s office to make sure they’re staying on task when you send those duties out. You also won’t be able to hop across the hall if something goes haywire with someone’s paycheck. You’ll have to get on the phone or send an email and hope someone responds quickly. Can you give up that level of control?
Really, whether or not you outsource your company’s payroll depends as much on you personally as it does on what the outsourcing companies (or employees vying for the payroll job) promise you. Take a look at your business’s circumstances, think about your own issues, and make the decision that takes care of both the best. Good luck!
Published: June 28, 2013

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