Small Business Brief

Accounting, Employees

5 Common Myths About Outsourced Payroll Providers

Outsourcing is a useful option for most business owners to consider. There is any number of tasks you can choose to send to a provider. Almost half of all US companies choose to outsource their payroll.

There are many reasons for this. For small and mid-sized business owners, a lack of in-house expertise is often one factor. Another issue is how complex payroll can be. Finally, making mistakes on your payroll can land you in hot water with the IRS.

With those facts in mind, it’s not hard to see why someone would choose to team up with the experts. Outsourced payroll providers can get you the expertise you need in short order.

Like other business owners, you might hesitate to send your payroll to an outside team. There are plenty of myths about payroll providers. It can be hard to tell what’s true and what’s not.

We’re here to sort fact from fiction. With this guide in hand, you’ll be able to put some of your concerns to rest. Greater clarity will help you decide whether outsourcing payroll is the right move.

1. Outsourced Payroll Providers Cost More

One common concern is payroll outsourcing cost. Many people believe that conducting payroll in your own offices will cost less.

Have you thought about what you’re paying in salaries and benefits? What about the space your team uses, or the software they need to conduct payroll activities? If they need to upgrade their skills or accreditation, you could end up paying for that too.

There are also issues around payroll not being finished on time. If your team is busy or feeling overwhelmed, they may send your payroll remittances to the IRS late. This can result in penalties, which runs up costs.

You have two options. You can keep paying those penalties. You could hire another person, which means spending more on wages and benefits.

Errors can add up too. Some people think in-house teams are less likely to make mistakes on payroll, but that depends on the team. If you run a small business, you might be doing payroll yourself.

Finally, you also have to think about opportunity costs. If you do payroll yourself, think about what other tasks you could accomplish with that time. What other jobs could your team get done if they didn’t have to worry about payroll every two weeks?

The long and short of it is working with an outsourcing payroll company often costs less.

2. Their Way or the Highway

Another myth about payroll outsourcing is that you’ll have no say in how payroll is completed. The provider will impose their system on you.

Outsourced payroll providers have efficient systems, but they also want to work with you. If you have procedures you need to be followed, a good provider should accommodate you.

Discuss your concerns and your needs with your provider. If a provider isn’t willing to work with you, they’re not going to be a good fit for your business.

3. More Mistakes Will Happen

This myth likely arises from business owners working with poor providers. Many people say payroll providers are insensitive to their clients’ needs and they make mistakes because of it.

Not all payroll providers are created equal. The majority of them actually make fewer mistakes. There are a few reasons for this.

First, you’re working with a team of experts. In fact, this is one of the major benefits of outsourcing payroll function for any business. You get instant access to a team with more experience, knowledge, and training in this area.

If you’re a small business owner, that could be a lifesaver. Your own team may be good at what they do, but they may not have the same depth of knowledge. Payroll administrators need to be aware of many different regulations.

Next, a payroll provider is likely to be working with the latest technology. This helps them work more efficiently and reduce the potential for errors.

4. Generic Solutions and Limited Choice

Many people believe that outsourcing payroll means opting for generic bundles of services. Providers will lock you in and charge extra fees for anything outside of the packaged service. You won’t be able to get a payroll solution designed for your business.

Anyone who says this probably hasn’t worked with the right payroll outsourcing provider. The experts at Next Generation Payroll put stock in creating custom solutions. Since the services are tailored, businesses realize more of the benefits of outsourcing.

5. Outsourcing Is for Big Business

This is a particularly stubborn myth, and it applies to not just payroll but all outsourcing. Small and mid-sized business owners believe outsourcing isn’t a solution for them. Only big businesses have the opportunity to outsource.

Nothing could be farther from the truth! There are many examples of entrepreneurs and start-ups outsourcing. Some count it as part of their growth strategy.

Working with outsourced payroll providers helps small businesses the most too. Although you may have just a handful of employees, you may not have the in-house expertise to handle payroll efficiently. Outsourcing this time-intensive task is one way to streamline the process.

It also frees up time and money for your in-house team. By outsourcing, you can get back to doing the things that actually matter to you. You can boost in-house productivity by sending work to a payroll provider.

Small business owners can and should take advantage of payroll outsourcing solutions.

Help Your Business Grow

There are plenty of myths about outsourced payroll providers. The truth is working with them has many benefits. Even small and mid-sized business owners can take advantage of outsourcing.

Choosing to outsource could help your business get back on track for growth.

If you’re looking for more tips about managing a growing business, you’re in the right place. Check out our articles for the latest advice.