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Advice for SMBs: Why Should You Outsource Payroll?

Common Payroll Mistakes and How a PEO Can Help Avoid Them

Quick look: Approximately three-quarters of HR professionals feel they’re working beyond capacity, leading many HR departments to outsource administrative functions, like payroll. Here, review the many ways outsourcing daily functions can benefit HR teams and how to decide whether your business should choose a PEO payroll service provider or standalone payroll software.

Payroll management and other human resource (HR) services are becoming more difficult to handle, according to the latest HR outsourcing trends.

Nearly 75% of HR professionals believe their department is working beyond capacity, says the Society for Human Resource Management (SHRM)’s State of the Workplace Report 2021-2022. Teams are trying to manage complex administrative tasks while also tackling other organizational priorities.

That is why companies are choosing HR and professional employer organization (PEO) payroll services for their business. Forbes notes that finding the right balance of in-house teams and outsourced services is how some of the largest companies in the world are able to maintain steady growth and productivity.

Keep reading to learn more about the many benefits of outsourcing payroll, how to outsource payroll, and why you might consider a PEO or human resource outsourcing (HRO) service provider versus a payroll software.

How PEO payroll services can help your business

Payroll is a crucial piece of business management but one of the most challenging for HR teams. Some payroll responsibilities you’ll need to consider include:

  • Researching payroll laws and regulations
  • Entering new employee information
  • Managing data security
  • Pre-processing and running payroll
  • Tax withholdings, tax filings, and tax credit support and processing
  • W2 and W3 preparation and filing
  • Economic/workforce grant support
  • Forms 940 and 941 filing
  • Garnishment processing
  • Fielding employee questions about pay stubs

A payroll solution can offer peace of mind and enable HR teams to increase efficiency, scale operations, maintain payroll processing compliance, and reduce overhead expenses. Here, we unpack three pillars of payroll outsourcing that can revolutionize how your business manages HR.

1. Enable HR teams to accomplish more and scale operations

Managing payroll functions for a company is time-consuming, making outsourcing a beneficial and efficient practice.

When you opt for payroll outsourcing, it doesn’t mean you’re replacing your in-house payroll or HR teams. In fact, leveraging a dedicated team for payroll management allows your existing team to achieve more, freeing them up to focus on the company’s growth versus time-consuming, daily administrative tasks.

Your team will be able to focus on improving company culture, retaining top talent, responding to client requests, and other organizational goals on your behalf.

2. Protect your payroll processing so it is always compliant

Frequent changes and complex government regulations can make it challenging for internal teams to proactively manage payroll, which is one of the great advantages of HR outsourcing.

Payroll professionals are experts at keeping up with changing laws, regulations, and the complexities of remote work, ensuring your company stays compliant wherever it operates and avoids payroll penalties and reputational damage.

3. Reduce overhead expenses for your business

Hiring a PEO payroll service to manage payroll for your business can reduce overhead expenses that come with keeping a large, in-house HR team on the books, as well as prevent unexpected penalty costs from improperly processing payroll.

The Internal Revenue Service (IRS) penalizes nearly 1 in 3 businesses for payroll mistakes, according to the National Federation of Independent Business.

Experts in payroll know how to navigate regulations so you can avoid these extra expenses, as well as efficiently process and file payroll, saving you countless hours and associated costs.

Why do you need a PEO payroll service provider vs. a software?

But why is a payroll service provider the answer? Why shouldn’t you just purchase payroll software for your team to use?

As HR teams are given new automation tools to help them streamline payroll processes, what many small business owners don’t understand is that these tools, while certainly helpful, rarely solve all payroll challenges. Teams are still left struggling to oversee everything on their own, like managing regulatory laws and requirements around multistate work, processing new employees as they onboard, and more. And of course, they need some help setting up the software to customize it to your unique business needs.

A PEO payroll service provider, on the other hand, can not only offer you time savings as they manage these tasks for you, but their expertise, as well. When you partner with a PEO, like ExtensisHR, it’s the customization and team of HR experts behind the payroll software that sets us apart and helps equip you to navigate unpredictable challenges in your industry with confidence so you can strengthen and grow your company.

We streamline your payroll processes and give you access to reliable customer support, as well as include other critical PEO services that can benefit your company. Our dedicated payroll experts are available to answer any questions and assist with other challenges, providing the support your company needs to grow and succeed.

“I would advise any privately owned business to look not just at how much money you’re wasting, but how much time, too. The professionals at ExtensisHR flawlessly and completely manage everything for us, giving our employees more time to focus on business needs instead of spending time entering data into a portal.”

Testimonial from a growing hedge fund

If you’re looking to outsource payroll and leverage other PEO solutions like employee benefits, recruiting, and risk and compliance services, click here to learn more about ExtensisHR’s PEO payroll offering.

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