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Is It Time To Outsource Payroll?

Picture this - you’re about to hire your very first employee. First of all, congrats on an exciting milestone in your business! Second, have you given any thought to what you’ll do for payroll? Will you handle it in-house or will you outsource? What features are important to you, such as direct deposit, employee benefits or time tracking?

The consideration to outsource payroll doesn’t have to be limited to hiring employees. Sometimes it makes sense to outsource payroll even if you’re the only one on your payroll (i.e., after you’ve made an S Corp election). Whatever your reason, what follows are a few considerations that should be taken into account when it comes to outsourcing payroll:

Payroll taxes are complicated, not to mention they are changing all of the time.

As a business owner, do you have the time or knowledge to keep up with the rules and regulations that impact your payroll taxes? If the answer is no, outsourcing payroll might be a smart next step for you. When selecting a payroll service provider, be sure to ask them how they keep up to date with the changes in tax laws. Ask them how they plan to communicate these changes with you and your business.

Choose a payroll service that allows you to run payroll with ease.

There are payroll service providers, such as Gusto, that can seamlessly integrate with your existing bookkeeping system. Your current bookkeeping system might also offer payroll services as well. When making the decision to outsource payroll, consider a provider that makes it quick and painless to run and approve payroll. You might even consider a provider that allows you to approve payroll through an app on your phone. It is likely that in your decision to outsource payroll, saving time was a large motivator. Make sure you ask your potential payroll providers what they can offer you to make this part of your business seamless.

Payroll mistakes can be costly and frustrating.

Errors in state tax deductions, missed hours, or improper pay rates not only negatively affect your employees but they can also result in fines or penalties to the business owner. Any misrepresentation or failure to accurately report federal and state employment taxes falls on the shoulders of you, as the business owner. This is true even if you utilize a payroll service provider so it is incredibly important to choose a reputable provider. Be sure that you understand how you’ll be able to review and approve reports and payment before submissions, how errors or changes should be addressed, and how you’ll receive confirmation of reports and payments after the fact.

IMPORTANT: Even if you are using a third party provider for payroll, as the business owner you will be legally responsible for paying the taxes due. This is why it is vital to select a trusted payroll service.

Outsourcing payroll may offer increased security over sensitive payroll data.

Keeping electronic data safe is an ever-increasing challenge in today’s climate. It’s likely that you have already taken mitigating steps to keep your business’ data safe but this is even more important when you’re housing sensitive payroll data (i.e., SSN, bank accounts, wage information, etc.). When utilizing an experienced outside vendor to handle payroll, you should have added confidence that your payroll data will be securely processed, stored, and protected at all stages. It is important to ask any prospect payroll provider about the security of their system(s) and whether they’ve experienced data breaches.


If you are still on the fence about whether you should outsource payroll, that is okay. It isn’t a decision that should be taken lightly but take comfort in knowing that if you do your due diligence, outsourcing payroll can give you valuable time back to do what you love most. And if you’re up for further reading, check out this article to learn more about all that you need to consider when doing your own payroll and payroll taxes.

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