If you’re a small or medium business, chances are you could benefit from handing over your payroll to a third party. You may be afraid to let someone else handle a function that is that important, but you could end up hurting your business by handling things yourself. There are some cases where it would indeed be better to manage your payroll in-house, however. But, in most cases, smaller businesses have much more to gain from outsourcing. Let’s take a look at some of the pros and cons of outsourcing payroll management.
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Pro – Stay Out of Tax Trouble
Tax codes are changing all the time and are extremely complex. These can be difficult to deal with, even for an accountant. Payroll services, on the other hand, have to be on top of these changes to stay in business. If you’re finding yourself overwhelmed by tax regulations and you need someone who can help, we suggest you check out G&A payroll. G&A payroll management services will make sure that you don’t make mistakes and that you stay compliant at all times.
Con – Payroll Services Aren’t Perfect
With that being said, there are some cases where payroll companies can make errors. An inexperienced team could make an error if they’ve never dealt with special aspects of a company’s payroll like restaurant tips or unionization for instance.
Undoing errors can turn into an administrative headache and become costly. It could also cost you the trust of your employees. In some cases, errors are made because the payroll company doesn’t have the right resources in place. They should be able to provide an interface that allows business owners to enter hours themselves, for instance. If the company doesn’t provide this, they could be making errors by inputting hours manually.
Pro – You’ll Save Time
No owner should be wasting time on their payroll if it’s taking away valuable time from their business. You should be spending most of your time working on building your business instead. A payroll company can help you save time in so many ways.
In addition to printing checks and calculating deductions, some services will have a clock in/clock out function for employees so you won’t have to waste time calculating hours for each pay period. A service that offers online pay stubs and performs direct deposits for you will allow you to save even more time.
Con – You’re Still Liable
Even if a payroll company will accept some liability in case they commit mistakes, you’ll still be the one responsible at the end of the day. If the IRS goes after the payroll company for mismanaging your taxes, you will still owe these taxes to the IRS. The payroll company could also have a malicious employee embezzling funds. These issues can get very costly and difficult to solve, so choose your team carefully.
If you’re a small or medium business owner and payroll is becoming a headache to you, then it’s probably a good idea to outsource. You should still know the risk of doing so so that you can move cautiously.