While some enterprises choose to fulfill payroll duties in-house using manual payroll or accounting software, many have discovered that the expertise of a certified payroll professional is preferable. When determining whether or not to outsource payroll service, the amount of time and other resources necessary to complete the mail payroll duties is usually a major factor.
Roughly 25% of payroll users have concerns about staying compliant with tax laws and rules, one in five are concerned about the time it takes to manually process payroll, and around 16% are worried about tasks such as managing fees, taxes, deductions, withholdings, and other expenses for employees in different locations.
Even though they are recognizing these obstacles, over a third of firms still conduct payroll manually, with some of them using a desktop program and others using online resources, and just 17% considering switching to an outsourced service.
Payroll and overall tax administration may be difficult and time-consuming, but they are necessary, hence busy company owners are increasingly deciding to outsource these tasks. If you are still unsure, here are the main reasons why to outsource your payroll.
Payroll processing takes time and requires attention to detail. It is true whether you have 10 or 10,000 employees. So, there is an unforeseen expense of time that might be better spent on other important company objectives, such as increasing revenue or servicing consumers.
Managers have more time to concentrate on what is more important to them by outsourcing payroll to a trusted source. In many circumstances, they’ll also have several alternatives to optimize the amount of time they save throughout the pay period.
Then fees, such as new employee reporting or benefits calculations, can be simply added to the outsourced mix, and company owners can choose how often they want to be alerted about payroll-related chores. Payroll providers generally only have to contact owners once every pay period to advise them that payroll is done properly provided there are no inconsistencies or difficulties.
Payroll obligations indeed take up a lot of time. Payroll duties will exist in every pay period, starting from hiring the first employee. As previously stated, the complexity of payroll processing needs a large daily and weekly time commitment – time you can’t make up elsewhere.
The demands on your time may be expensive. Calculating exact payroll amounts, providing in-house reports, preparing and remitting state and federal payroll taxes and returns, or just delivering paychecks are truly time-consuming activities.
Every pay month, each employee’s hours must be totaled, checked for correctness, and multiplied by their hourly rate. The correct amount of taxes must then be computed and removed from the gross pay to arrive at a net figure.
Additional computations must be completed if the employee has deductions (for example child support, retirement plans, additional insurance) or gets any benefits. When you multiply each of these formulas by the number of people in your company, it’s simple to see how just doing the math may eat up a major portion of your working hours.
The actual checks must be produced, signed (electronically or physically), and handed in once the exact payment obligations for each worker have been computed. Direct deposit is probable for certain workers, so those amounts must be confirmed and processed electronically, but pay stubs must still be made accessible to them. Furthermore, these documents must be kept safely for tax and reporting reasons.
The amount of pay earned by all workers, any benefits or various deductions withdrawn, and all payroll tax amounts must be meticulously documented at the conclusion of each payroll period for future accounting reasons.
Payroll reporting must be included in all fiscal year-end reports, depending on the size and structure of the company, particularly if it is publicly listed or presently seeking investors. Even though they aren’t needed, many company owners use prior payroll reports to forecast recruiting and staffing needs.
Payroll data is also required for tax reasons, including year-end income tax filing as well as quarterly and yearly payroll tax reporting. It might require extra work each quarter to keep this information collected and available for future auditing or transfer to an accounting expert.
Even after the payroll statistics have been arranged and recorded, there are still payroll tax obligations to be met each quarter and at the conclusion of the fiscal year. To verify that the right amount of payroll tax has been withheld, business owners or authorized personnel must meticulously calculate and submit a quarterly payroll tax form. Each quarter, this document must be sent to the IRS, along with the correct amount of withheld taxes.
Businesses must file a year-end payroll tax statement at the end of the year, which confirms each of the quarterly statistics and calculates any leftover taxes payable. Businesses, like individuals, are required to file an annual income tax return, with payroll data included as a deduction.
Easy and precise tax filing and payment are seen as a very significant feature of an outsourced payroll system by more than half of manual payroll users. Whether you perform a time/cost analysis on a per-payroll period or monthly basis, you will discover the advantages of working with a payroll service provider.
Avoiding payroll errors
Payroll mistakes may be inconvenient and expensive for both companies and workers. Employees may face an unexpectedly large tax deduction from their last payment of the year, which falls around the holidays, due to a miscalculation in state tax deductions.
Inadvertently lowering an employee’s salary due to missed hours or incorrect pay rates may produce irritation and long-term animosity. These errors might have a detrimental impact on your workforce, resulting in strained relationships between the company and the employees.
Payroll mistakes may result in fines and penalties for the company due to incorrectly estimated tax obligations. In general, company owners aren’t experts when it comes to the complex world of government tax rules. At the same time, they are legally liable for any deception or failure to appropriately disclose employment taxes to federal and state authorities.
Audits and fines may result from these errors, which no firm wants. The IRS data shows that almost 2 million tax returns for firms with revenue between $200,000 and $1 million were audited in 2016, with 978,564 entities facing penalties. It is good if these problems are identified before they are filed, but reviewing employee paychecks and tax returns may still take a long time.
Considering all of these difficult chores and the possibility for errors, handling payroll on your own may end up costing you more in the long term than the initial savings.