To Outsource Payroll or Keep In-House – That is the Question Pt. 1

When it comes to processing payroll, there are many ways it can be done.  Which is best for you will depend on time, knowledge, comfort level, whether you need job costing, turnover rate of staff, the variety and types of benefits your company offers, how many states you deal with, wage garnishments and the complexity of your payroll.    I remember when I first started working with payroll – 3 months later I had forgotten what reports I used and how to calculate what I needed (it wasn’t built inside of QuickBooks back then) for quarterly reports so I spent quite a bit of time “relearning”.  I had a client who decided it was more economical to outsource payroll – not because she couldn’t figure it out, but she could spend her time on billable work; for what it cost to outsource, she came out ahead.

Many people assume that the least expensive way to do payroll is in-house.  While that may be the lowest direct dollars paid, what is often overlooked is how much time it takes and the cost of those processing the payroll.  When salaried or steady hourly, the dollars spent on payroll are often lost in the bigger dollars of having staff.  So take the hourly rate of the person(s) doing payroll and multiply the hours spent on timesheets, paycheck creation, paying payroll taxes, and anything else payroll related like adding/removing employees, changing employee benefits or withholdings and so on. Companies who offer payroll services have it down to a system, so most times it goes faster for them and for the dollar, it’s often a good deal.

Next time, I’ll discuss the different ways you can outsource payroll. 

So, do you process payroll in-house or outsource it?  Are you happy with your current payroll setup?  I’d love to hear!

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