Payroll is an important part of your business. Companies often start out processing their own payroll because they consider it to be more cost-effective and they want to maintain control over their data. 

More often than not, when chosen correctly, using a payroll processing company will be less expensive and an easier way to pay your employees and file taxes. A payroll company provides ease of mind because they are up to speed with all local, state, and federal taxes. They also make sure to file returns at the correct times so you aren’t stuck with a late penalty. 

Let’s take a look at some of the pro’s and con’s associated with processing payroll in-house versus hiring a payroll processing company.

Pros and Cons

In-House Pros

  • Can easily fix any errors that may arise
  • All employee private information is kept in house

In-House Cons

  • Cost of having a payroll employee
  • Software purchases or subscription costs
  • Not filing taxes on time and getting a penalty
  • No access to a payroll or HR expert
  • Staying current with tax regulations, especially local
  • File quarterly and year-end payroll taxes, print W2s and 1099s
  • Not always being able to offer direct deposit
  • Your vacations will have to be scheduled around pay periods

Outsourced Pros

  • The company is up to speed with all new tax regulations
  • Less expense due to not having a dedicated employee for payroll
  • Ability to have direct deposit for employees and contractors 
  • Access to payroll or HR experts
  • Portals for each employee to review their stubs, update address, etc.
  • No infrastructure or maintenance costs

Outsourced Cons

  • If there is an error on a check you have to reach out to get it fixed and a new check issued

If you’re looking to outsource your payroll take into consideration price, company reputation, and services provided. 

Ask the following questions:

  1. What services are included in the plan?
  2. How quickly can a mistake be fixed?
  3. Do you file the local taxes?
  4. Do you cover the cost of penalties?
  5. What is the cost per year, which includes all year end tax filings? What is the cost per each pay period?
  6. How often do you raise rates?

Making sure payroll is done right is the most important thing. You don’t want to jeopardize your employees or be in violation of taxes.

In my experience, business owners can be misled to believe outsourcing payroll is very expensive. But the opposite is true! The average cost savings is 18% less than when processed in house. 

At the end of the day, outsourcing is the way to go. 

If you aren’t sure which solution is best for you. We would love to help.