Payroll is one of the most time-sensitive and demanding functions of any organization, large or small. It must be accurate plus follow local, state and federal regulations or face fines, penalties, and disgruntled employees. Whether you are already outsourcing your payroll or processing in-house, it may be beneficial to conduct a payroll checkup to make sure you are paying your employees in the most cost efficient way.
To keep your employees and the government happy on payday, you have a couple of options to choose from. You can choose to process all your payroll functions in-house or send it all out to a payroll service bureau. Each solution has its own set of benefits and drawbacks; what may work for one organization may not work for another. While choosing to outsource is usually a cut-and-dry decision for very large organizations, it is not that easy for small to medium-sized businesses. If your business is facing this decision, here are some things to consider to help you make the best choice.
Questions To Guide You Through Your Payroll Checkup
- Flexibility: Is your payroll typically smooth each period, or do you find that you are regularly making last-minute changes each cycle?
- Accountability and Accuracy: Which of the options is going to allow greater control to correct errors BEFORE employees get their paychecks?
- Compliance: If choosing in-house, how will you ensure that your company is in compliance with current payroll legislation and labor laws that change frequently?
- Customization: Is one option better suited to meet the unique needs of your individual company? Is customization allowed?
- Data Security: Are you OK with your payroll data being processed and your employee’s sensitive data being housed at a 3rd party payroll service bureau? What security measures do they have in place? What are the liabilities involved?
- Integration with Your Business System: What are the in-house payroll options for your ERP system? How well will the data flow between the outsourced bureau and your ERP system?
What Are The Benefits of Both Options?
In-House Payroll Benefits:
- More Flexibility: Allows for control over all aspects of your payroll, such as timing and the flexibility to make changes easily and quickly.
- Long-Term Savings: Initial costs for systems and knowledgeable staff for in-house payroll tend to be higher than outsourced. However, processing in-house will likely have an overall lower total cost of ownership between 2-4 years post implementation.
Outsourced Payroll Benefits:
- Ensure Compliance: Outsourced payroll service bureaus are specialists and experts around payroll tax and labor laws. They are up-to-date on all the changes in local, state and federal requirements.
- Reduce Administrative Burden: If you don’t have a dedicated payroll specialist in your organization, then this burden is falling on someone and keeping them from their core, hired responsibilities. Outsourcing frees up your employees to focus on what they do best.
Doing Your Due Diligence
Whatever you decide, make sure you put in the time to research both methods of payroll processing when conducting your payroll checkup. Ensure that you are comparing apples-to-apples to avoid any surprises in the long-run. For example, there would be no joy in finding out last minute that you will be nickel-and-dimed by your bureau for every special report that your company needs for end-of-the-year reporting to stakeholders, or extra charges for W2 printing and mailing that got missed in the fine print.
If you need help, call the business solution professionals that implemented your HR software system. They can answer your questions, and help you with questions you need to be asking. A business system consultant with intimate knowledge of your processes will be able to help guide you to the best payroll choice for your organization. If you don’t have a business partner, consider giving us a call at 949-268-4371. You can also browse our HR Resource center.
Article reprinted from the Spring 2017 issue of Bellwether.
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