When Payroll Starts Taking Too Much Time, It Might Be Time to Outsource
At first glance, managing payroll seems manageable, especially when you’re only writing checks for a few employees. So why would a small business owner consider outsourcing it?
Well, as your team grows and responsibilities pile up, you might realize payroll demands more time and precision than you anticipated. According to industry data, small business owners typically spend around 17 hours each month managing payroll manually.
That’s a significant chunk of time that could be spent growing your business. If payroll terms like FICA, SUTA, or FUTA make your head spin, or if you’re constantly racing to meet deadlines, it might be time to look into a smarter solution.
Manual payroll takes mental energy and organization, and if you make a mistake, like missing a payday or mishandling taxes, it can lead to penalties and unhappy employees.
Thankfully, you’re not stuck with the DIY route. Many small businesses are turning to providers like Beyond to handle payroll more efficiently. If you’re curious whether outsourcing might be the right move for you, here are a few key things to consider, along with how to choose a service that fits your needs.
What Payroll Outsourcing Actually Involves
Outsourcing your payroll means partnering with an external company that manages everything from calculating wages to processing tax withholdings and issuing payments. Services like Beyond also ensure reports are filed correctly and on time, and they often provide employee portals, tax form generation, and even HR features.
Some platforms offer expanded business support, making them an even more valuable partner in keeping operations smooth and compliant.
Who Is Outsourcing Payroll?
Outsourcing is becoming more popular across all industries, from law firms and dental practices to gyms and franchises. Businesses of all types, sizes, and locations rely on payroll partners to stay efficient.
One expert, Thomas J. Brock, CFA and CPA, noted a recent success story where a client in pest control franchising outsourced to a payroll software provider and freed up hours for strategic growth. The result? Record revenue gains.
How Much Does Outsourced Payroll Cost?
Costs vary depending on the route you take:
- Hiring an internal payroll employee can run into the tens of thousands annually, ideal for larger companies, but costly for small businesses.
- Working with your accountant might cost $5,000 or more per year, depending on their billing model.
- Partnering with a traditional payroll service gives you human support but may come with similar costs to accounting services.
- Choosing a payroll software provider like Beyond tends to be the most cost-effective option. According to Brock, comprehensive platforms can offer full payroll and HR functionality for $100 to $300 per month, and some even assist with benefits.
Why It Matters: IRS Penalties and More
Mistakes in payroll aren’t just annoying, they’re expensive. In 2023 alone, the IRS issued over $4.6 billion in payroll-related penalties. Common errors like late tax payments, incorrect deductions, or failing to file W-2s on time can add up quickly.
Even seasoned business owners admit their payroll systems could be better. In fact, a study by Ernst & Young found 54% of businesses saw room for improvement.
7 Warning Signs You’re Ready to Outsource Payroll
- You’re Late Running Payroll
Employees rely on consistent pay. If paydays sneak up on you or bank holidays throw off your schedule, consider a provider like Beyond that automates reminders or handles the whole thing for you. - You’re Making Input Errors
Miskeying hours or pay rates? It’s a common issue. Outsourcing reduces manual steps, which means fewer chances to mess up and if a correction is needed, most services can take care of it quickly. - You’re Missing Tax Deadlines
Quarterly filings and multiple state forms can pile up fast. Most payroll providers file them automatically (just confirm what’s included in the plan). - You’re Late With W-2s or 1099s
Forms for employees and contractors must go out by January 31. Miss that deadline, and you’re looking at penalties. Good payroll services take care of these filings, often for a small extra fee. - You’re Struggling With Cash Flow
Payroll services help smooth things out by integrating with accounting tools, allowing you to project expenses more accurately and offering options like pay-as-you-go workers’ comp. - You’re Unsure About Deductions and Garnishments
From benefits to court-ordered wage garnishments, managing deductions is complex. Payroll software automates it, reducing your risk of error. - You Bill Hourly for Services
If you’re a professional charging by the hour, the time you spend on payroll is time you’re not earning. Paying $200 a month to save four hours? That’s a smart trade-off.
Should You Outsource? Pros and Cons
Pros:
- Time Efficiency: Automate time-consuming tasks and focus on growing your business.
- Compliance Help: Avoid fines by staying current with changing regulations.
- Better Visibility: Get detailed payroll reports that help with planning.
- Happier Teams: Reliable and timely pay builds trust with your staff.
Cons:
- Additional Cost: Outsourcing isn’t free, expect at least $40/month.
- Loss of Control: You may have less visibility into day-to-day payroll decisions.
- Bad Timing Can Complicate Things: Switching mid-quarter can cause reporting headaches.
- Trust Issues: Not all providers are created equal—choose carefully.
The Best Way to Outsource Your Payroll
There are a few paths to explore:
- Hire In-House: More control, but more overhead.
- Use Your Accountant: Good for businesses that already work closely with one.
- Go With Payroll Software (like Beyond): Often the best value, especially if it includes HR and benefits support.
- Choose a Traditional Service Provider: More personal, but usually more expensive.
No matter what you choose, the goal is to free yourself from the complexity of payroll so you can focus on running your business. And if you go with a software solution, make sure it’s one like Beyond that’s trusted by small businesses and backed by real support.
