Outsourcing payroll is an economic and practical strategy in business as it effectively saves you time and money by taking away difficult tasks such as calculations and tracking of employee salary which are traditionally done manually. Through it, you can use a software, hire a bookkeeper, or work with a professional employer organization (PEO).
The payroll outsourcing company will work with your payroll by gathering your employees’ personal data such as their position, hiring date, and salary rate, they would also collect any time card data, calculate the pay for every employee, and then do the paying by issuing a direct deposit or payroll check.
To explain further, we’ll now discuss some step-by-step on how the payroll outsourcing company works.
First, they will set up a payroll software with your company where all important data will be collected and secured. This includes your employees’ information and bank account and your payroll bank account. This is for the purpose of direct deposit. New employee information will also be gathered to provide state-required new hire reporting.
Then expect them to request for time card data (clock-in and clock-out times or hours worked) each pay period so they can input it into their software. They also have to confirm about the hours worked each pay period whether it’s paid or unpaid before they can calculate the gross pay. After that, they can now initially run your payroll, process pretax and post-tax deductions.
They will also be in-charge in depositing to your employees’ accounts (direct deposit, pay card) and in delivering paychecks and advices to your office or to your employees’ homes. Paying vendors and payroll taxes will also be part of their responsibility. Every once in awhile they also have to produce reports about the business.
This depends on the payroll outsourcing company but some may also offer working on new hire onboarding paperwork, required employee tax documents, and I-9 compliance. Some also provide employee handbooks, HR expertise and labor law infographics.
Outsourcing is useful for businesses that don’t have enough people with the time or experience to do payroll. These are mostly small businesses who only have one person doing both bookkeeping and payroll tasks. In this case, businesses that don’t have an accountant or bookkeeper on staff and are not willing to pay the average salary for those positions can find outsourcing more preferable.
But sometimes, payroll processing is being assigned to a person with HR responsibilities. However, even with an HR person on staff, it is still recommended to outsource the payroll aspects of the job to someone familiar with labor and tax laws to make sure they will keep you away from having conflict with authorities.
The key to succeeding in business is to limit your business’ expenses and risks. You must also make sure that your time and resources will be used for revenue-generation instead of administrative and compliance work such as payroll and HR tasks which you can outsource while you focus on your company’s growth.
