Using an outsourced payroll solution is typically more efficient for a small business than processing payroll internally. Leaving payroll to experts frees up hours that you can devote to other important parts of your business. Whether it is your time, staff time, or a combination, chances are the hours could be better spent winning more business, improving customer service, fine-tuning business operations or launching a new product line. Among the areas where outsourcing will save time are:
Cutting and distributing paychecks
Calculating and paying withholding and employment taxes
Preparing and distributing W-2s and 1099s at year-end
Handling employee payroll inquiries
Many business owners underestimate the cost of processing payroll internally by failing to account for all hours spent and resources allocated to pay employees and maintain payroll paperwork. A thorough cost assessment usually proves that a small business saves money by outsourcing the processing, tracking and filing of payroll documents. To assess your own internal payroll costs, consider:
How much the time spent is actually worth: consider the cost of your time and the time of anyone who processes or "touches" payroll. Often, many people in a small company are involved in the various parts of payroll processing.
What savings would outsourcing provide: since an outside provider can handle all the responsibilities involved in managing payroll and answering employee questions, a small business can often eliminate or reallocate an internal payroll resource.