Outsourcing Payroll Myth #1

“If we outsource, someone else is doing all the work”

FACT: Companies often have the false impression that they will no longer need to worry about any payroll functions if they decide to outsource. The reality is that companies are still responsible for providing the outsourcing company with the essential information. The company must collect and input items such as time, vacation, and pay information and then transmit the information for the outsourcer to print the paychecks. As a result, all of the payroll functions are being completed internally.

Another issue that can arise with outsourcing is the loss of control over the payroll process. Service providers mandate that you meet their deadline and work on their schedule, not your own. If there is a problem with submitted payroll information, the company must alert the outsourcer of the error and wait for them to correct it - potentially delaying your payroll.

Full-featured in-house payroll applications automate everyday functions such as tax reporting, vacation accruals, time input, direct deposit and garnishments. The current personnel would be completing the same tasks, whether the company chooses to outsource or bring the payroll process in-house.

Optimum Solutions customer:
“While outsourcing, my staff still had to process the payroll, which is up to 90% of the work.I always thought outsourcing was better, until I really looked at the features and benefits of bringing payroll in-house with Optimum.”
Bruce Kalem
CFO & VP
Milan Express Company, Inc.

Outsourcing Payroll Myth #2

“If we bring payroll in-house, we have to become tax experts”

FACT: Most full-featured in-house payroll applications will maintain and update all tax tables and calculate the necessary taxes, thereby automating the tasks of tax filing. With an in-house system, there is no need for your staff to become tax experts. In fact, an in-house program can simplify the process - making electronic tax filing available at the click of a button.

Optimum Solutions customer:
“I was a little nervous to begin tax filing on an in-house system. I soon found out that the tax information is updated by Optimum - it’s all built into the program. Also, the support personnel at Optimum answered every question I had, it was just so easy.”
Lesa Kloski
Assistant Controller
Tredit Tire & Wheel Company, Inc.

Outsourcing Payroll Myth #3

“If we outsource, it is more cost-effective”

FACT: The true cost behind outsourcing is often difficult to predict. Over time, a company will be faced with numerous hidden costs, fees for every report needed and price increases solely at the discretion of the outsourcing provider. Companies will also often be presented with additional fees for W-2 filing, tax filing and printing of checks. By bringing payroll in-house, many companies will see a return on their investment in as little as one year, as the purchase price of an in-house system is often equivalent to the company’s fee for only one year of outsourcing.

Companies will often falsely believe that they will need to hire additional employees if they bring payroll in-house. The truth is that the same staff responsible for outsourced payroll information can easily manage the duties needed for an in-house payroll system.

Companies are also often concerned that they will need additional IT staff if they bring their payroll in-house. Most companies must have basic IT support in order to maintain equipment needed for daily activities. With in-house solutions, all support and maintenance is provided directly by the vendor, and is completely automated, therefore no additional IT staff is required.

Optimum Solutions customer:
“Before I purchased the software, I had to justify it, that was easy to do once I illustrated how quickly we would receive a payback - we saw a return on our investment in less than two years.”
Donna Pickerill
Controller
White Hydraulics, Inc.

Many companies have discovered that bringing payroll in-house can save a significant amount of money and receive superior support, thereby providing more value-added services to the company.

Employers need to remember that they are ultimately responsible for the deposit of federal payroll tax liabilities.  Even if a third-party service provider is making the deposits, the employer is the responsible party.  If the deposits are not made, the employer is liable for all taxes, penalties, and interest due.

-APA, Payroll Currently, Volume 18, Issue #11

Outsourced payroll may seem like the simple solution, but employers remain liable for stolen taxes. Outsourced or in-house, make sure you’re informed and plugged in on all things payroll - especially when it comes to taxes and your business.