Payroll outsourcing offers flexibility to businesses

Jeff Hunter is president of The Payroll Company, a payroll bureau offering payroll, tax and human resource functions to businesses.

With the new year quickly approaching, owners of small and large businesses alike are thinking of ways to improve their businesses in the year to come. How can they be more productive, make fewer mistakes and, most importantly, become more profitable? Outsourcing has become a popular way for business owners to improve efficiency. It allows owners and managers to spend less time on tasks they don't enjoy, so they'll have more time to focus on the reasons they started their business in the first place: to do what they're good at and enjoy the financial rewards.

As businesses plan for the coming year, it's an ideal time to consider outsourcing. Surveys have revealed that the most commonly outsourced function is payroll. Companies choose to outsource payroll for a variety of reasons. The No. 1 reason is a lack of personnel to handle the critical and time-consuming payroll responsibilities in-house. A lack of equipment and technology, a need for security and confidentiality, and a need to increase efficiency are other motivations for businesses to outsource payroll. In addition, many companies find it difficult to keep up with constantly changing regulations, which are complicated regardless of the number of people a company employs. Businesses that have had to pay fines for missing a tax payment deadline or find that mistakes have been made in their payroll quickly realize the value of outsourcing.

There are definite benefits of switching to a payroll service around the new year instead of at mid-year. If a company chooses to hire a payroll service at the beginning of the year, it allows both companies to start fresh with year-to-date documentation. This assures a smooth transition from in-house payroll to outsourcing. If a business chooses to hire a payroll service before the end of the year, it will be relieved of the cumbersome year-end paperwork. If a company has accurate records to share with the payroll service, the payroll service will be able to print and process W-2 forms.

These are tasks that companies often find confusing and time-consuming. And the company that chooses to outsource can look forward to the year ahead, knowing that no one will have to calculate hours, worry about tax payments, quarterly reports, filing tax forms and new-hire reporting, all tasks that must be done. A company or person who specializes in payroll is best equipped to make sure all those steps are completed, and more importantly, completed correctly. Businesses who might find it difficult to see the cost savings of hiring a payroll service need only pay one penalty for a late tax payment to realize outsourcing is definitely a worthy investment.

Small businesses can benefit greatly from the resources a payroll service provides. If a company has a limited number of employees, it's likely that there are plenty of important, even urgent, things employees should be doing, instead of adding up their hours and trying to stay educated on payroll regulations.

Without the cost of an additional salary, small businesses are able to utilize the skills and knowledge of people who specialize in payroll. Also, by partnering with a payroll service, small companies have access to technology they likely couldn't afford alone. For example, direct deposit of paychecks is increasingly popular and generally only feasible for small companies through a payroll outsourcer. This method increases security and confidentiality by eliminating paychecks that could get lost or fall into the wrong hands. The trend is also popular with employees, who appreciate direct access to their payroll information on their computers.

Another example is payroll debit cards, which make it possible for companies to offer direct deposit to employees who don't have traditional bank accounts. Employees can access their money through ATMs and point-of-sale terminals. There are a wide variety of benefits for companies who use payroll debit cards including the elimination of check handling, printing and storage costs; reduced exposure to check fraud; fewer lost or stolen checks and less need to place stop payments or reissue checks. It also allows companies to consolidate regional payroll programs into one centralized operation.

Look forward to 2004 as a year of opportunities for improving your business. Consider outsourcing as a viable option to increase efficiency and profitability.