If you anticipate wholly outsourcing more HR and administrative tasks in the future, look for larger Business Process Outsourcing (BPO) providers that also offer the services you will need further down the road. When outsourcing payroll, all data will be held by the third party, not the employer. For management teams who frequently need to access employee data after hours or on weekends, this could be an issue. Some services may make all data available at all times through a software service, this can reduce the disadvantage, providing staff and management are able to successfully navigate the software. Full-service payroll companies have broad experience with running payroll and ensuring tax compliance for businesses. If you’re hiring internationally, look for a global payroll provider like Deel that can take on the responsibility of navigating unfamiliar payroll laws and best practices for you.

• If a provider handles payroll data for employees in the European Union (EU), they have to meet General Data Protection Regulation (GDPR) standards.
• The payroll service will likely need access to that information to calculate and deliver payments via payroll checks or direct deposit.
• Using payroll software isn’t typically considered outsourcing since it still requires work from your team.
• This may take the form of data punch cards, fingerprint scans, software systems, data provided by HR, or a combination.

That’s why it’s not unheard of for a company employee — like a dedicated HR pro — to verify the outsourcer’s work before payroll runs. At a bare minimum, the outsourcer will notify the employer or key stakeholders when payment goes out. Let’s explore what it entails and how it gives businesses like yours an edge. Correcting any of these factors after submitting payroll can require a costly fix or a steep penalty. Even seasoned HR pros could lose days getting the process right manually.

Services

It is becoming increasingly common for businesses to engage independent contractors or freelancers, rather than employees, especially when operating across international borders. Payment processing for contractors can also be outsourced, much like payroll. For small businesses with fewer than the importance of internal controls in accounting 50 employees, an HR outsourcing solution can cost about $500 to $1,500 per month. Medium-sized businesses can expect to pay $1,500 to $5,000 per month, and large organizations will pay even more. The costs of payroll outsourcing vary dramatically, depending on the provider you select.

• In 2024, a wide selection of “payroll outsourcing providers” are to be found both domestically and internationally.
• A New York- or San Francisco-based company that keeps payroll in-house, for example, must pay “big city salaries” to attract the right employees for managing payroll, just like the rest of its internal workforce.
• Once the possible cost savings of the practice became clearer, there was no turning back.
• Even the best payroll managers are prone to mistakes or data breaches.
• That way, you’ll receive prompt notice of any issues with your tax accounts.

Some think, “Why outsource payroll if I have to know about taxes and regulations anyway? However, it is important to have some kind of idea of how it works so you can check their legitimacy. Not only that, but it’s also important to ensure the payroll company is familiar with local regulations and compliance so you don’t get into trouble. Some PEOs or Employers of Record (EORs) offer payroll outsourcing as a standalone service. If you are hiring internationally and your employees need to be hired by a local company by law, a PEO operating in the area will be able to help with employer of record services as well as payroll processing.

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Blueprint is an independent, advertising-supported comparison service focused on helping readers make smarter decisions. We receive compensation from the companies that advertise on Blueprint which may impact how and where products appear on this site. The compensation we receive from advertisers does not influence the recommendations or advice our editorial team provides in our articles or otherwise impact any of the editorial content on Blueprint. Blueprint does not include all companies, products or offers that may be available to you within the market. We have written an article detailing our picks for the 7 best payroll services out there.

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Her work has been featured in Forbes, LendingTree, Rocket Mortgage, The Balance, and many other publications. Paycom helps businesses prevent mistakes and their staggering consequences. Explore Beti to learn why it’s the ideal choice for outsourcing payroll to Paycom. To this end, assign administrative employees to serve as a liaison between your workforce and the payroll processor. This doesn’t mean you need to see every piece of the process, but you should never be cut out of it entirely. Choosing a service like QuickBooks can be a great way to accomplish those goals.

Less Control Over Payroll Processing

Because businesses of all sizes are finding it more necessary to gain efficiencies and manage appropriate taxing—and they don’t have the resources or expertise to do it alone. One of the major benefits of using outsourced payroll software is that your payroll will be processed by a third-party company whose expertise is in processing payroll. While your company’s area of expertise is in your own industry rather than in payroll, outsourcing payroll entrusts the process to a company specializing in payroll processing. This may be especially important for businesses that either don’t have a dedicated HR department or are new enough to not have a lot of experience with payroll. Outsourcing payroll is when a business pays a fee to another company to handle processing employer paychecks. In addition to making direct deposits or sending physical checks, this should also include deducting employee tax payments and employee contributions to benefits packages.

This includes calculating tax withholdings and deductions, depositing employee paychecks for each timesheet, compiling payroll reports, and producing payroll registers. There are a few signs it may be time to think about outsourcing your payroll solution. If your current system causes frequent mistakes, this could become a liability. You may also have a hard time complying with IRS or labor laws, and employees may experience frustration due to long wait times for paychecks.

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Pricing should be explained clearly, most likely calculated with a base service charge and additional charges per employee payroll processed, plus any additional services. Check for possible penalties for late payments or breaking the contract. How long will the contract be valid, and how long will prices be locked in at the agreed-upon rate? Ensure that your data will be kept private and that there is an acceptable legal channel to pursue of this or any other clauses in the contract. If there is an error on the part of the outsourcer that may or may not lead to a fine against the employer, are they held financially or legally responsible in any way?