For employees, a regular paycheck represents much more than money in the bank. It represents stability, achievement and trust that their hard work will pay off, literally.
For employers, payroll isn’t quite so symbolic. Eleven percent of small business owners in a recent survey cited payroll as a top challenge.1 Payroll management can be fraught with compliance pitfalls, potential errors and a significant investment of time.
Companies with 25 full-time employees waste 100 person hours per year on manual payroll processing and exception handling.2 In addition to the time invested, calculating withholding for regular or supplemental pay is difficult for 49% of business owners.3
Plus, payroll can have a profound impact on cash flow. Spending more than 30% of gross revenue on payroll is one of the most common reasons businesses fail.4
It pays to outsource.
While it may seem that outsourcing payroll is a luxury that small businesses can’t afford, this is not the case. Payroll solutions range from simple paycheck processing services to more complex time and attendance tracking, as well as retirement plan set up and reporting. After looking at total costs, it often makes more sense to outsource.
Most payroll services are flexible, with customized options available for different business types and sizes. All deliver similar benefits.
Saves time. Consider all the tasks involved in payroll processing: tracking benefit deductions, wage garnishments, new hires and terminations, paid time off, and so on. Then there are the tax issues including preparing and sending accurate and timely W-2 forms.
These are important but repetitive tasks that require extreme attention to detail and flawless data inputs. Outsourcing these responsibilities frees employees and managers for more mission-critical, strategic endeavors.
Saves money. If time is money — and it is — it may make more financial sense to outsource than to hire staff to manage the payroll function. Consider the wages and benefits consumed in-house by the payroll team, plus confidentiality concerns and accounting efficiencies.
One-third of small U.S. firms spend $1,000 to $5,000 annually to do their own payroll. More than a third of companies spend more than $5,000 a year, with some companies reaching expenses as high as $40,000 or more.5
Minimizes mistakes. For employees, mistakes in deductions, hours or pay rate can be costly and frustrating, and can damage employee-employer trust.
For employers, payroll mistakes can result in fines and penalties. According to the IRS, as many as a third of employers make payroll errors, and 40% of small businesses pay an average penalty of $845 per year for late or incorrect payroll filings and payments.6
Promotes self-service. Employees want self-service access to their payroll platform. In fact, 84% of HR leaders identified employee self-service options as key to their success.7
An integrated payroll platform allows employees to print their own tax documents, preview pay information, access pays stubs, change tax allowance forms and update their personal contact information. Letting employees complete these tasks themselves saves them — and your HR team — time and headaches.
Enhances security. Payroll data is particularly sensitive. Outsourcing to a trusted partner enhances security with state-of-the-art IT, including redundant systems and data storage protocols.
Improves compliance. Government regulations are complicated and ever-changing. Twenty four percent of small companies rank payroll taxes as the number one most
burdensome task, both financially and administratively.8 IRS penalties for submitting the wrong payroll tax amount can range from two to 10% of total payroll, and start accruing on the payroll tax due date.9 If your company has employees in multiple states or overseas, meeting these compliance requirements can be especially thorny.
Professional payroll service providers stay abreast of government rules as part of their job. Their level of compliance knowledge can’t be matched by most in-house payroll processors. In addition, most payroll companies have teams of experts who can research questions and provide answers to employers and employees.
Consider the options when choosing a payroll provider.
Businesses have many options when it comes to selecting an outsourcing partner for payroll services — and many options for services as well.
For example, in addition to basic payroll processing, companies can choose services such as filing and paying payroll taxes, new-hire reporting, software integration, vacation management, self-serve and mobile access, and reporting.
What are your “must-have” services versus “nice-to-have” services and, of course consider your budget. Also look at the company’s experience in your industry, its reputation and its ability to handle the level of complexity your payroll presents.
Be open to the possibilities.
Employees expect accurate, timely paychecks. You want to meet these expectations — and satisfy compliance and reporting requirements. Don’t let preconceived notions about cost stand in the way: Outsourcing payroll could be the answer to all your payroll needs.
Synovus Commercial Banking or your Relationship Manager can help sort through your
payroll processing needs and options. Contact us to discuss next steps.
Important disclosure information
This content is general in nature and does not constitute legal, tax, accounting, financial or investment advice. You are encouraged to consult with competent legal, tax, accounting, financial or investment professionals based on your specific circumstances. We do not make any warranties as to accuracy or completeness of this information, do not endorse any third-party companies, products, or services described here, and take no liability for your use of this information.
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