Last Updated on Feb 25, 2020 by James W


Basically speaking, payroll outsourcing refers to the business practice in which firms contract with business services to handle their payroll functions. Using these outsourcing services ensures that the payroll process is well managed. This thus eliminates the need for a functional payroll department within the outsourcing firm.

Services Provided

Providers of payroll services manage very diverse functions including:

– Wage and salary calculation
– Tax withholding
– Distribution of withheld funds to the right government agencies
– Deposits of net pay into employees’ bank accounts

Reasons for Outsourcing Payroll Services:

1. Savings

The main reason why most firm elect to go the payroll outsourcing way is on account of the fact that it saves a lot of money and time. Handling the financial tasks related to payrolls costs a lot of cash and time.
Thus when a firm decided to contract with outside vendors, payroll teams are restricted to a couple of individuals within a firm. These individuals are then authorized to provide the data needed by the payroll company, which then proceeds to handle the remaining details.
To this end, it follows that you won’t have to get your employees to spend most of their work week doing calculations on taxes and hourly wages or dealing with the withholding issues.

2. Options

Also, seeing as most of the payroll firms offer such options as direct deposits and cutting checks, it follows that your employees will get the opportunity to choose the format they prefer.
Those who select checks will get them via courier through their employers. Alternatively, those who select direct deposit only need to check their bank accounts to find the money credit therein.

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3. Less Worries

The other benefit of using payroll services is that your employees won’t have to worry about keeping up with the changes in the regulations impacting on tax calculations. This is because the outsourcing firms update their info constantly so that they comply with the most current laws.
Thus, you, as the employer, will never have to worry about getting such penalties as late charges due to the improper calculation of due taxes. This benefit will end up saving you significant amounts of cash.

4. No Technology Woes

Additionally, payroll outsourcing will prevent employers from the complex task of dealing with technological woes. Seeing as how payrolls are processes off- site, you won’t need to upgrade your payroll software, spend cash and time on hardware and program glitches which typically slow down payroll processes. Thus employees will always be paid spot on time and end up happy.
Anyway, payroll outsourcing means that you will incur additional business expenses on a more frequent basis. However, this is made up for in terms of the money and time you will save each and every month. Most payroll outsourcing companies will often offer alternative payroll plans – one of which is likely to end up being ideal for firms of different types and sizes.


Overall, relying on payroll service companies makes a lot of sense. It keeps payroll records updated and ensures that withholdings are accurate. This is why most firms choose to go the payroll outsourcing way.


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