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Wondering whether outsourced payroll services could help your business? Payroll and tax duties are complex and time-consuming, yet essential. Thus, more companies are outsourcing these functions.
Although some firms keep payroll in-house, many opt for business process outsourcing (BPO) with service providers. Timeliness and accuracy drive companies across different industries to contract payroll services externally.
Continue reading to learn more about the benefits of payroll outsourcing. This article also discusses the various tasks an external vendor can handle.
What Are Outsourced Payroll Services?
Outsourced payroll services cover so much more than mailing checks. Tasks range from integrating new hires into the payroll system and setting up direct deposits to tracking timesheets and managing end-of-year tax responsibilities. With outsourcing, businesses can confidently entrust these duties to third-party payroll experts.
During the early days of outsourcing, companies were only comfortable subcontracting tasks that required low skill levels. Nowadays, businesses outsource important functions such as money management and customer service. Doing so lets them direct limited funds to revenue-generating activities.
Now that you know what BPO is for payroll functions, here are some commonly outsourced payroll tasks:
- Setting up employee accounts
- Implementing compensation methods
- Tracking time worked
- Calculating salaries owed
- Withholding income taxes, payroll taxes, and garnished wages
- Distributing pay
- Establishing security protocols for protecting company and employee data
- Ensuring adherence to government rules
- Handling employee deductions
- Reimbursing payroll taxes
- Completing end-of-year tax work
Benefits of Outsourced Payroll Services
Outsourcing is key to ensuring a seamless payroll process. Outsourcing payroll services means employees get paid the right amount at the right time, all the time.
Finance and human resources (HR) teams are often too busy processing pay runs instead of allotting time to strategy and higher-value activities. Payroll is complex and time-consuming because it involves accomplishing certain steps and adhering to legislative and filing requirements.
The main advantage of outsourced payroll services is having more time to focus on what truly matters: strategic business drivers that help your company grow.
Here are other benefits you can enjoy when outsourcing your payroll processes to a reliable BPO provider:
Avoid Employee Disengagement Due to Late Compensation
Workers get demotivated and uninspired due to payroll mistakes or delayed payments. A survey by PwC found that financially stressed employees are less engaged at work.
Moreover, employees tend to lose trust in a company when their payments are often late or incorrect. They may even write bad reviews on public forums or official company channels, ruining their employer’s reputation and turning away competent candidates.
Businesses can show appreciation and care for their employees by ensuring timely payment processing with outsourced payroll services. On-time salaries strengthen employees’ motivation and stimulate their sense of fulfillment in the office.
Prevent Costly Tax Fines
Small business owners sometimes underestimate financial audits. They must think twice, however, as Congress recently approved the appropriation of Internal Revenue Service (IRS) funding amounting to $80 billion to ramp up audits. With more efficient federal auditing, businesses must be even more careful to avoid being levied tax penalties.
Here are some actions that may result in audits:
- Delayed tax payment for income tax and the Federal Insurance Contributions Act (FICA)
- Late filing of tax returns
- Negligent operations and failing to submit accurate information returns
Over time, penalties may compound due to missed tax payments. This can deplete cash flow and impede other business activities.
Outsourced payroll services for small businesses help you comply with tax obligations and laws to prevent potential legal ramifications. They also ensure you pay your payroll taxes correctly and promptly, helping you avoid fees, fines, and penalties.
Gain Access to Payroll Expertise
A good service provider hires top talent who understands payroll processing inside and out. Their professionals specialize in the function of and compliance with government regulations. They also receive continuous training as part of the solution provided.
Excellent BPO companies match you with candidates who are experts in finding mistakes and ensuring accurate data. Additionally, they are proficient in:
- Handling voluntary and involuntary employee withholdings
- Processing FICA, Social Security, and Medicare payments and deductions
- Implementing 401(k) integration and regulations with payroll deductions
- Tracking the eligibility dates of employee benefits and processing benefit enrollments
- Updating local, federal, and state tax guidelines and adjusting payroll figures as needed to maintain compliance
Enhance Payroll Data Security
Payroll is a complicated and potentially risky business process. Companies are at risk of embezzlement, company records tampering, and identity theft, even with trusted employees.
Outsourcing payroll to a reputable and seasoned BPO company offers secure handling of your sensitive payroll data. The service provider gives you access to multiple server locations and sufficient backup.
Lastly, a reliable payroll vendor invests in state-of-the-art infrastructure to store and protect your data simply because it is part of the solution offered.
Achieve Time and Cost Savings
Regardless of the size of your workforce, processing payroll requires time, patience, and strong attention to detail. However, time spent on payroll accuracy is often at the expense of more pressing matters, such as improving customer service and building revenue.
With outsourced payroll services, you regain valuable time to focus on what matters most. You can outsource tasks such as benefits administration or new hire reporting, and you can even specify how often you discuss payroll tasks. Your BPO provider will likely only reach out once per pay period if no problems or discrepancies arise.
Moreover, companies save major costs when outsourcing to an offshore BPO service provider. The third-party provider works during the client company’s regular business hours and informs them once payroll has been processed.
Improve Employee Self-service
Self-service options help improve employee success. An integrated payroll platform with self-service options saves considerable money and time. These tools allow employees to take ownership of simple, everyday tasks, such as:
- Updating personal contact information
- Submitting time-off and leave requests
- Accessing pay stubs and previewing compensation information
- Changing shifts
- Accomplishing onboarding paperwork
- Populating tax allowance and benefit forms
- Printing tax documents
The Bottom Line
Outsourced payroll services certainly bring many business advantages, from time and cost savings, data security, and expertise to advanced technology, flexibility, and scalability. However, client companies must find the right BPO provider to guarantee successful payroll management.
Additionally, business leaders must also decide on payroll outsourcing lightly. They must carefully consider financial savings and convenience. A solid understanding of the benefits of payroll outsourcing, coupled with accurate information on current payroll management costs, provides helpful guidance.
Looking for a reliable payroll service provider with a long track record? Your search stops with Unity Communications. We provide custom payroll solutions that fit your needs.
Let’s connect to find out more.
