Payroll is one of the top time-consuming tasks for Boston business owners who want to ensure their employees are paid punctually, given the correct amount, and provided access to their pay even in times of uncooperative weather. According to the 2014 Small Business Taxation Survey, among small businesses who handle payroll internally, 27% reported spending more than six hours per month on payroll taxes, and one in ten reported spending more than 10 hours per month. Those 10 monthly hours add up to over 120 hours per year, or three full work weeks spent on payroll tax administration alone.
With that being said, it’s no wonder why small and mid-sized business owners are turning to outsourcing for efficient payroll management and expertise. In fact, according to the National Small Business Association’s 2014 Small Business Taxation Survey, 60% of small businesses outsourced their payroll function in 2014.
Outsourcing your payroll operations enables small businesses to focus on the core competencies of the company, such as growing the business and generating sales. Below we’ve listed a few critical payroll management services that can be handled by outsourcing:
Prepare employee paychecks
Handle employment tax processing and payment
Track employee bonuses and commission
Calculate all paid time off
Handle 401k Deductions
Setup employee direct deposit
Calculate all deductions, business expenses, per diems, etc., and more…
In addition to all the tasks an HR outsourcing agency can do for your business, there are 5 key benefits that can boost growth and
1. Productivity – Inc. Magazine recently named payroll responsibilities as the number one duty small businesses should be outsourcing. Why? For starters, payroll is time-consuming and shifts your employees’ focus (or your focus) off important, revenue-generating activities. When you outsource your payroll responsibilities, it takes the burden off of your shoulders, and you can save yourself the energy and time of having to become a payroll expert. In addition, many small businesses find it more cost-effective to outsource these duties rather than hire an employee strictly for payroll purposes. According to salary.com, the average yearly rate for a Human Resources Manager living in the Boston area is $78-80k. A significant price tag for a small business owner.
2. Tax Expertise – Keeping up with ever-changing tax regulations is time consuming, and not a strong point for most business owners. In addition, the issue of payroll and taxes can be overwhelming. This can lead to many costly mistakes for small business owners. In fact, according to the IRS, approximately 40% of small businesses are penalized every year for incorrect payments and filings. When you use an outsource payroll provider, their expertise will quell any penalties that may occur for incorrect filings.
3. Minimizing Fraud – Within small businesses, it is not unheard of for fraud to occur when one to two employees are solely responsible for handling all aspects of accounting. Unless a manager or business owner is keeping a constant watch on the employee responsible for accounting, cutting the checks and tracking payroll, it is not difficult for someone to divert funds, add fictitious employees, etc. By outsourcing your payroll, you remove this liability and prevent fraud from taking place.
4. Taking Advantage of Technology – When you outsource your payroll function, you have the opportunity to obtain access to leading-edge technology that ensures streamlined payroll management and accurate tracking. Online self-service portals provide the reliable convenience of handling payroll functions online, which enables your employees to access, manage, and report payroll information in real-time.
5. Complete Financial Reporting – In addition to handling employee payroll, you can choose to receive a variety of reports such as expenses, timesheets, department payroll breakdowns, earning statements and more. For a business owner to create these reports on his or her own, in addition to other daily duties, it can be time-intensive, stressful and shift the focus off core business functions.
As a business owner, you have a lot on your plate, in addition to the never-ending responsibilities that come along with owning a business. If you find yourself spending excessive amounts of time and effort on payroll and it’s accompanying tasks, you may want to consider joining the 60% of small business owners who outsourced their payroll function in 2014.
If you’re looking for ways to increase productivity and profitability for your small business, please feel free to reach out to us to see how we can help.