Outsourcing to a Payroll Provider

Often the most challenging aspect of running a business is keeping noncore, but critical, functions such as payroll, human resources and IT running smoothly. That’s where outsourcing can come in. The Business Accounting Services team of professionals at Kruggel Lawton are big fans of outsourced payroll for our clients. If a new client starts working with us and tells us they are attempting to process payroll internally, we can’t wait to share how outsourcing will help them save time, money, and headaches down the road. With so many great providers to choose from, both local and national, it’s easy to find one that is the best fit for your business and budget.

Here’s a little more detail on why we think outsourcing payroll functions is a good idea:

1. Time Savings
   Managing payroll for each pay period requires quite a bit of time and attention to detail, regardless of company size. That demand on your time increases as your staff grows. Each pay period becomes a series of checks and balances to ensure no errors are made while handling a considerable amount of data that varies from employee to employee. The time you spend on these functions is time you could use to focus on what you do best – running your business. To save even more time, some payroll vendors offer integration with popular time clock software providers so that instead of manually entering hours, all the data is saved electronically.

And then there’ s time savings on the employee side. Many payroll providers feature an online “Employee Self Service” (ESS) tool. ESS allows employees to log in to their account, view paystubs, and confirm personal information. They don’t have to wait for the business owner or HR department to get back to them with information, it’s all stored electronically.

1. Cost Savings
   There are a variety of ways that outsourced payroll can save you money. To start, you won’t have to pay staff to carry out all of the functions mentioned above. Then, instead of printing and mailing physical checks you can easily offer direct deposit for employees. For those employees who still request a paper check, payroll providers typically offer a lower cost on printing, checks, and envelopes.
2. Avoiding Penalties
   Businesses are legally responsible for any cases of misrepresentation or failure to file accurately with federal and state agencies. Even just one small mistake can set up a red flag for an audit or result in costly penalties. By hiring a payroll company, you will be using professionals who make it their job to stay on top of the latest state/national legislation and wage and hour laws.
3. Legal Compliance
   Beyond just getting paychecks out the door, many payroll companies can help with other areas of legal compliance. For example, with the new ACA reporting requirements, large employers (50 or more FTEs) must report on their health insurance coverage offerings for the year. Payroll companies can analyze each employee and classify them in the proper employment category for simple reporting at the end of the year.

Finding the Best Fit

Selecting a vendor for outsourced payroll services requires careful consideration. Not every vendor will be able to provide the functions and level of service you’re looking for. Begin by soliciting referrals from other business owners that are comparable to your own in terms of number of employees and revenue. Among other things, ask about vendors’ customer service — how often do problems arise? When they do, is the vendor responsive and does it resolve issues satisfactorily?

Also think about fee structures. Some vendors charge a flat fee that increases as you add employees to your payroll. And, fees aside, can the vendor adapt in case you expand or downsize in the future?

Liability is another significant issue. Mistakes by payroll providers can lead to sticky and expensive compliance problems. Will the vendor assume liability, or will you be on the hook for resulting costs? Similarly, be sure to check out the vendor’s financial stability and business culture. You don’t want to park your critical services with a vendor that could go out of business without warning or with whom your management clashes on issues such as risk tolerance and ethics.

Once you’ve selected a vendor, it’s important to maintain frequent communication with them through implementation and then regularly throughout the course of your relationship.

If you’re interested in hiring a payroll company to streamline operations for your business and have some questions, give us a call or send us a message. We’re happy to help point you in the right direction!

Jill Replogle - Senior Staff Accountant

Senior Staff Accountant
Elkhart | jreplogle@klcpas.com
574.264.2247 ext. 308