In-House vs. Outsourced Payroll: The Facts

Someone in every company is responsible for paying salaries, covering payroll tax, and picking benefit plans for the workforce. Is that someone you? You may not know it, but there is a growing shift to outsource payrolling services to staffing firms.Below are some results from a survey administered by the Journal of Accountancy.

  • 47% of U.S. companies reported outsourcing payroll
  • 73% of U.S. companies with revenues of $5 billion or more outsource the payrolling function
  • The largest companies are more likely to outsource payroll

If you’re not an employer or HR manager, you might want to take a step back to learn about how payroll has been traditionally handled “in-house.” Knowing the difference between in-house and outsourced may cause you to think twice about working with a staffing agency, or without one.

In-House Payrolling: The Basics

Common practice for managers is to process the payroll ahead of time. Human resources managers may devise a payroll-processing schedule that allows some time to process payroll and correct issues before employees receive their paychecks. For the average business owner, payroll processing should be completed three to five days before the actual pay date.For the majority of employers across the United States, payrolling is not an inherently complicated set of tasks, operationally. Companies that only have salaried, permanent, and direct hire staff typically utilize in-house as the tax complications come into play when contractors are added to the equation.

Outsource Payroll For Cost Control

Oddly enough, companies will often outsource payroll in an effort to downgrade full-time employees to 1099 contractors. Outsourcing payroll is most beneficial when you want to get someone off your payroll. While there are many tax advantages to this option, it couldn’t be more simple to get started. Outsourced payrolling companies like Premier Talent Partners will help you hand over the weekly responsibilities of what it means to pay someone - you just submit your information and we take it from there.From a management perspective, there’s nothing else for you to do beyond supplying basic information. After that, payroll processing companies will manage your entire back office, send out W-2s, and manage reporting for the employee.

Remove Roadblocks When You Can

Processing payroll is important, but is it the best way to spend your time? Management professionals and senior executives should not waste time processing payroll unless it’s cost-effective to do so, which typically occurs in companies that have a staff larger than seven. The advantage of human resources management professionals is creating available time for senior leadership to concentrate on the core business. If you find yourself paying an undesirable opportunity cost, it might be time to outsource payroll and focus on strategic tasks that ultimately affect your bottom line. Payroll is not now nor has ever been appropriate to handle at the last minute as there are rules and regulations of paying workers, and you must strictly adhere to these in order to stay compliant and mitigate risk. Outsourced payroll reduces these potential roadblocks, In-house payroll inadvertently drifts towards them.

Project-based work in the new Gig Economy

If you’re outsourcing payroll, it’s actually quite simple to scale and add additional contractors, especially for time-sensitive hires. Some organizations will use in-house payroll for FTEs and use outsourced processing with any contractors to hire for coverage. This is one of the most important reasons why Premier Talent Partners is a champion for the contractor community.The gig economy doesn’t delude contractors into thinking they will be retained long-term. They are brought on specifically to perform a function, and if they’re still around a year later, they might be hired into a full-time, salaried position. In the interim, you may find that there is a disparity between retention of salaried and contract workers, especially if your contractors receive zero benefits. This should be one of the most influential reasons for business owners to outsource payroll - to benefit workers.

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