Outsourcing payroll: 5 reasons to seek help

Outsourcing Payroll: 5 Reasons Businesses Should Seek Payroll Help

Outsourcing payroll: 5 reasons to seek helpFor any business owner, payroll is an essential task. And when payroll goes wrong, you are sure to hear about it. Errors and miscalculations can be a major headache because they negatively affect employee satisfaction, not to mention the legal issues that can come with them.

Outsourcing payroll may seem like an unnecessary expense, but there are many benefits that come with hiring someone else to handle it. Here are five reasons you should consider outsourcing payroll duties to a third party:

1. Save valuable time

Whether you pay on a weekly or bi-weekly basis, trusting your payroll services to someone else can save you a ton of time. Payroll processing is demanding, and requires a lot of time and attention to detail. There is a large amount of data involved: hours worked, hourly wages, overtime, FICA, paid time off, and more.

When you should be focusing on running the day-to-day portion of your business, payroll requires intense focus on the checks and balances that ensure it’s correct. As a non-core function, it can pay off big time to get outside help. Hiring a professional payroll service allows you to focus on what matters most – growing and maintaining your business.

2. Feel confident about compliance

People make mistakes, even the most detail-oriented people. Generally speaking, business owners are not steeped in the minutely-detailed world of government tax regulations. They are, however, still responsible for accurate employment tax reporting to federal and state agencies.

When a mistake is made, it can lead to audits and costly penalties from the IRS.

With rules and regulations always changing, small business owners cannot be expected to stay on top of everything. That’s why outsourcing payroll to a professional service provider, who must stay on top of the laws, regulations, and tax rates, makes sense.

3. Lower costs

You read that right – outsourcing payroll can actually save you money. It can reduce your overhead expenses because you don’t have to pay for personnel and time, purchase the hardware, software, paper, ink, and other associated costs. With a professional service, all of that is built in, and with multiple clientele, the costs are shared, which ultimately means lower costs for you.

4. Strengthen data security

Having your payroll done in-house comes with security risks, with identity theft and embezzlement being high on the list. Your payroll administrators have access to all employee records, which puts that information at risk for tampering. Then there’s the chance of employees stealing money for personal gain.

In addition, your software must be secure as well as the servers where the data is stored. Using encrypted servers with redundant data centers can be costly (see above about cost savings).

A professional payroll service can increase security from both a personnel and a technology standpoint.

5. Additional professional services

In addition to payroll calculations, a professional payroll service should be able to:

  • Print/deliver checks
  • Make electronic deposits
  • Run detailed reporting
  • Issue W-2s
  • File taxes

Plus, your payroll provider may also offer benefit administration services for Flexible Spending Accounts (Section 125) and other tax-advantaged benefit plans.

Questions to ask before outsourcing payroll services:

  • What’s your experience? Are you licensed or bonded?
  • What is included in your basic services?
  • How big is your client base? How long does the average client stay with you?
  • If there’s a mistake, how quickly can you re-run payroll?
  • If I use your tax filing service, do you cover the penalties and/or interest charges resulting from an error on your part?
  • Do you provide filing assistance for local taxes?


DataPath Administrative Services is Arkansas’ largest and most experienced benefits administrator. We offer payroll processing, in addition to FSA, HRA, HSA, COBRA, and other employer-sponsored benefit account administration. Learn more about our payroll services.



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