Handling Payroll: In-House or Outsourced?

Handling Payroll: In-House or Outsourced?

Who handles your payroll depends on cost and complexity

A farmer asked me last week whether he should be doing payroll in-house or paying an outside company to handle it. That is not a simple yes or no answer. There are several factors I told him to consider:

*What is the current cost to run payroll in-house? Consider time spent running payroll, cutting/mailing checks, filing taxes and W-2s as well as the cost of your current payroll software if it is not included in your accounting system.

*How complex is your current payroll? Are employees working in more than one state? Are there any deductions for health insurance? Garnishments? What is your tax liability exposure for processing payroll and taxes incorrectly?

Who handles your payroll depends on cost and complexity

*Is the time spent on payroll better served in other areas of the business?

At a minimum the service of an outside provider includes processing your payroll, cutting/depositing the checks, paying employer due taxes, filing all required tax reports and generating the W-2s.  If you get into more complex systems, employees will be able to log into their employee file on the web (called employee self-service) to update tax info and employee's time can be allocated and tracked between several departments.

If you are looking to outsource payroll, look at several payroll providers and not just the known names such as ADP and Paychex.  The larger payroll providers have programs with all the bells and whistles, but that might be more than you need.  Have some local companies bid on the project as well. I found they are typically half the cost.

Do your homework; ask for references of other clients similar to your size operation.  Ask lots of questions about customer service. Have the payroll company give you at least one demonstration on the payroll system itself and a demonstration on the time clocks.  Also, confirm who is liable when a payroll issue has to go to court? If it is tax related, it should be on them.

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