Why Do Most Companies Outsource Payroll?

Employers may choose to outsource payroll operations strictly for a cost-savings initiative, but that doesn’t mean there aren’t ancillary factors that contribute to why it’s worth discussing at all. If you’re looking into outsourcing payroll, it may be to reduce time that can be allocated in other areas of the business. In this case, you may find that choosing not to outsource payroll may have more costly, long-term impacts that ought to be considered fully.

Contractors and employers do not work in isolation, so it’s necessary to start with how those relationships are fostered.

One common trend among contractors is constant turnover. How do you add value to contractors that you want to keep, yet can’t commit to bringing them on full-time? You need to change something, and that may lead you to offer benefits to your contractors. It’s no surprise Bay Area jobs receive such high acclaim in the tech community, which can be hard to manage at scale. This initiative to spur growth in the gig economy is flourishing and contractors couldn’t be happier with the benefits offered to them. Benefits they wouldn’t receive otherwise.

Who Benefits from a Switch to Outsourced Payroll?

Companies actively growing and scaling their staff are the most likely candidates to outsource payroll, for several reasons. First, you need to remember that in metropolitan areas with above average population density, moderately skilled workers may be able to float several offers, thus increasing the requirement of a competitive offer. When compared with companies that outsource payroll and benefits, companies that choose not to offer benefits to contractors will have a more difficult time swaying candidates during the selection process. Makes sense, right?

This approach embodies how Premier selects its partners. We choose to work with companies who value the benefits we offer. Our clients know what to expect and contractors appreciate the white glove service.

Outsourcing payroll benefits contractors and employers, but what about investors? The last leg of the decision-making process when selecting a payroll provider may be driven by your company’s investors or board members. Especially early on during an organization’s’ first few hiring milestones (scaling departments, adding offices), investors should look for vital signs that management is appropriately handling contractors, which most often comes down to treating them ethically and presenting opportunities to further the relationship when both parties benefit. Likewise, investors may also require that an organization outsources payroll, as this relieves the owners of liability when considering tax obligations and previous issues when misclassifying contractors.

Do You Need To Payroll Across State Lines?

If you currently payroll across multiple states, you may want to use Premier as an ally to support your transition to outsourced processing. It’s a benefit to partner with us if you are payrolling across state lines because you can rest assured that we understand the compliance/regulations required in the difference states. As an employer, you can know that having a phone number with a familiar voice on the other line is critical when you have a question or concern. We understand if your business isn’t headquartered in California, and we won’t hold it against you.

What happens if an Outsourced Payroll Provider isn’t making Federal Tax deposits?

Many employers outsource some or all payroll duties to third-party payroll service providers. These providers help ensure compliance with the IRS filing and deposit requirements. In the event of default by a third party, the employer remains responsible for the deposit of the federal tax liabilities and timely filing of returns.

A series of issues may arise if you accidentally select a fly-by-night payroll providers to handle your affairs. If you suspect your payroll service provider of improper or fraudulent activities involving the deposit of your federal taxes or the filing of your returns, you can file a complaint using Form 14157 Complaint: Tax Return Preparer.