Blog Post

To Outsource Payroll or Not: Wait…. You Have One More Choice.

Published on

Dec 10

Sheri Blaho

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Even a little as 5 years ago, a firm had only two choices for payroll technology:

  1. Outsource to a trusted vendor
  2. Purchase software and hire staff to run it

The cost analysis was pretty simple: After three to four years of paying outsourced fees, you could have covered the cost of a payroll system and your own staff. Given that most firms remain on a single solution for 7-10 years, it made perfect sense to purchase UNLESS security or confidentiality was an issue.

Many firms opted to outsource simply to remove information from accounting, payroll, or IT (Information Technology) employees. Or they thought they were avoiding tax obligations and fines.

But the landscape and your choices are changing quickly:

  1. On-premise publishers, such as Sage, are now moving to a pricing model that approximated outsourced fees.  Their fees no longer offer the same cash advantage.
  2. New players like UKG's, formerly Kronos, Scissortail gives you competitive SaaS pricing, control over your payroll processing, plus all the security desired.
  3. All payroll providers offer tax filing services as part of their software.

Myth: Outsourcing Payroll is a Time Saver.

That was true in times past. But with today’s payroll solutions allowing you take control of payroll processing, many of the big time consumers are still managed for you. Tax tables and tax filings are handled by a handful of tax specialty firms work seamlessly.  Your tax rates are maintained real time. After you complete payroll, they automatically initiated the tax filings and form to all taxing authorities. Few employees require checks, so printing and distribution are old-school. For your direct deposit employees, online access to check stubs allow you skip all the printing steps.

Outsourced payroll services require you to take responsibility to:

             Add new employees

             Inactivate terminated employees

             Enter demographic changes (address, name changes, etc)

             Enter taxable changes (change in marital status, number of deductions)

             Enter vacation hours

             Enter hours worked

At this point you have done all the heavy lifting. The next step is really simple. Run the program to calculate.

Yes, now you will want to review a report to make sure you have made no entries. But if you have, it is easy with today’s technologies to make a quick fix and rerun the payroll.

With an outsourced solution, the checks may already be in the employee bank accounts before the error is found. Then you will find that your outsourcer may charge you added fees to correct the check. Most firms charge based on number of payrolls per employee per year.  Each check is an additional fee. Any time you cut a special check, like commissions or quarterly bonuses, your fees will also increase.

Additionally, extra fees can be expected for each and every special report you need. Reporting tools are too frequently limited with outsourcers and data access fees can cause your bill to skyrocket.

Myth: Only Outsourced Payroll Offers Security That Keeps Information Hidden From Other Employees.

It is still true that on-premise payroll solutions are a challenge to keep confidential information away from IT employees. But current technology with software like Scissortail HCM by UKG, formerly Kronos allows you to keep your payroll in the cloud, safe from IT and their programming skills, while giving full control over the payroll processing steps.

Myth: Outsourcers Assume the Liability for Tax Issues That May Arise.

This has never been the case. A firm cannot transfer their liability or responsibility with any taxing authority. If there is a fine that is levied, you are responsible for the payment. You may have recourse to have the outsourcer reimburse you based on your contractual agreement, however. While the outsourcer assume the tasks for payment and filing, they will not be the ones pursued for any payments due.

So now that you know more about your payroll options, you should be better prepared to make a sound decision for your firm, but if you still feel like you have some questions, not only can CS3 Technology help you make the choices that are best for your business, we can also offer education and support when you really need them with our Serv Plan, so you won't have to hunt for help when you really need it down the road. Contact one of our knowledgeable team members today and learn more about your payroll technology options and let us help you find the best solution.

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