Business Beat
Is Payroll Outsourcing Right for Your Small Business? ployee just to manage payroll and payroll-related tasks. For small businesses that may not have a dedicated employee for completing these tasks, the numbers are even more staggering. In a recent study conducted by The Electronic Transactions Association, small business owners valued their time at $170 per hour. Considering the business owner is principally responsible for operations, generating new business, generating financing, and myriad other tasks, this valuation can represent the owner’s value to the business. In organizations where the owner is investing time in payroll, this corresponds to an annual outlay of $150,280 per year. The time value isn’t the only cost of keeping payroll in-house, however. Approximately 33 percent of all employers make payroll errors, which can cost money in the form of fines, extra taxes, overpayments to employees, and additional administrative costs for finding and correcting mistakes. While these costs can vary widely across different industries, they should be a consideration factor for employers. Is payroll outsourcing right for your business, or should you keep it in-house? The following considerations can help you sort through the details. Once your business grows to have at least one employee, you are responsible for calculating, managing, and delivering payroll. Since this can be complex for business owners, many choose a thirdparty provider to handle some or all payroll responsibilities. It can be tough to determine whether payroll outsourcing is right for your business, but many businesses learn that the benefits of automating these tasks outweigh any perceived disadvantages. The following considerations can help you sort through the details. Both Sides of the Payroll Coin
There are several factors that contrib-
20
ute to your payroll outsourcing decision. On the one hand, you may feel that your small business can’t absorb the added cost of paying someone else to manage payroll. On the other hand, taking the DIY payroll approach can be time-consuming and expose your company to unnecessary risks. In a recent Paychex survey, HR professionals reported spending on average 11 hours per week processing payroll, with an additional 4.9 hours spent processing employee benefits, and another 1.8 hours managing time off. Combined, this amounts to over 17 hours spent each week on tasks that can largely be automated with the help of an outside payroll services provider. Assuming a 40hour work week and an annual salary of approximately $98,000, this equates to over $41,000 paid to an in-house em-
Texas Propane • www.txpropane.com
Cost Analysis for Outsourcing Payroll
While payroll software is a financial investment, it’s important to weigh that factor against the amount of time (and money) spent when processing payroll on your own. Don’t forget that errors from doing payroll manually can also cost you money or time. For instance, calculating or filing taxes incorrectly can result in fines or penalties. Each year, roughly 40 percent of small business owners incur an average of $845 in IRS penalties. To avoid paying more than you owe, payroll software can help ensure you don’t miss key tax-filing deadlines and that your company withholds and reports the correct amount of taxes. If you decide payroll outsourcing may be a more efficient path for your small business, the costs should be very straightforward. Choose a reputable payroll provider
