Doing payroll in-house poses a real threat to small business success. The stakes are higher than you might think—not just in penalties, but the most precious commodity of all: your freedom.

Payroll Outsourcing: A Simple Way to Enjoy More Freedom

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Meg Poccia, Senior Product Manager at Paychex, offers a thought-provoking perspective for small business owners.

Sure, you can save a little money short term by doing payroll yourself.

But what are you giving up?

The insights that Meg shares in this paper may surprise you.

What you will learn:

Give yourself the gift of freedom

Take a realistic look at payroll

Examine the risks of handling payroll in-house

Look at payroll outsourcing strategically

In addition, you’ll discover how Paychex can help you reclaim your freedom and gain a competitive edge.

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Give yourself the gift of freedomWhen considering the ingredients of small business success, most people think about a good idea, a great product or service, or sufficient operating capital.

After working with small businesses for over 30 years, Meg says there is another ingredient that’s equally important to success: freedom.

Meg has watched thousands of businesses start up, hire employees, and then go out of business. One factor that cripples these businesses is a lack of freedom for business owners to focus on what’s most important.

So what should business owners do?Meg suggests that they “give themselves the gift of freedom.” In other words: hire or outsource the tasks that are not absolutely essential to the bottom line, and focus your time on more strategic matters.

“ Once they hire their first employee, they fail to make the shift from an entrepreneur to an employer; it’s a very different skill set.” –Meg Poccia

Shifting from a solo entrepreneur to a successful employer requires small business owners to manage time more selectively in order to:

• Oversee the core aspects of their business including operations, sales, and cash flow.

• Follow a myriad of HR regulations, pay employees correctly, and handle new administrative tasks.

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Take a realistic look at payroll

A small restaurant that pays six employees weekly could end up making 72 tax deposits and filing 20 returns a year!

Many employers agree with the logic of this perspective at face value, but see payroll as a fairly simple and straightforward function.

However, here is just a small snapshot of an employer’s payroll tax responsibilities—whether they have 1 or 1,000 employees:

• Every pay period—Withhold federal and state income taxes, social security and Medicare, federal and state unemployment insurance, along with workers’ compensation and state disability insurance.

• Every month—Make monthly tax liability payments such as social security, Medicare, and federal income tax.

• Every quarter— File quarterly returns, and generate W-2s, 1099s, and 940s.

Calculations also vary depending on how much an employee earns, and complexity snowballs with bonuses, garnishments, and employee benefits.

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Examine the Risks of Handling Payroll In-House

Many small business owners not only underestimate the complexity of payroll, but the risk factors of making seemingly trivial mistakes.

Think an audit will never happen to you? In 2014, the IRS issued 6.8 million tax penalties totaling $4.5 billion

Risks may include:1 Loss of employee morale (even turnover) when they experience

problems with their pay

2 The “ripple effect” of errors cascading into incorrect federal and state payments, and the company’s general ledger

3 Lost time in correcting these mistakes

4 Missing due dates for payroll taxes and failing to file returns electronically

5 All these errors can lead to costly penalties by the IRS

6 Not updating tax rates when state and local jurisdictions make changes

7 Misunderstanding new laws on overtime, minimum wage, and employee benefits

8 Problems with software used for payroll

9 Data loss due to hardware failure or security breaches

10 Insufficient safeguards to prevent internal payroll fraud

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Look at Payroll Outsourcing Strategically

Given the risks of handling payroll in-house, it’s no wonder why most accountants overwhelmingly recommend payroll outsourcing.

Meg echoes the same sentiment, suggesting that small businesses outsource this function for reasons that extend even beyond non-compliance and penalties.

76% of accounting professionals surveyed indicate they have referred their clients to a full-service payroll provider. This is more than five times the number that recommended in-house payroll processing.

– 2015 survey conducted by Actionable Research

“ In essence, handling payroll is usually not in a business owner’s best interest. They don’t have the background, skills, or time, and it doesn’t serve any strategic advantage.” –Meg Poccia

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Look at Payroll Outsourcing Strategically

Avantages of payroll outsourcing may include: • Accurate, timely, payroll and reduction of errors and all the ensuing risks

• Removes the payroll burden from business owners and employees

• Improved peace of mind from a compliance perspective

• Saves time and saves money on direct and indirect costs associated with in-house payroll

• Gives the business owner their freedom back to do what they do best, and reclaim their focus on revenue-producing activities

Finally, if price is a concern, Meg suggested that businesses consider the following points:

1 One penalty pretty much covers the cost of a year of outsourcing.

2 The cost may actually surprise you when you amortize it into weekly or monthly increments; it may not be much more than a mobile phone or cable bill.

3 If you can afford to pay an employee, you can probably afford to outsource payroll. It’s the cost of doing payroll right.

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Action Steps

1 Read the eBook 7 Questions Every Small Business That Hires Employees Will Have to Answer for more educational information https://www.paychex.com/secure/whitepapers/7-questions-when-hiring-employees

2 Visit payx.me/freedom to learn more about Paychex payroll and tax solutions, and talk with a representative.

The information in this paper is furnished for informational use only and should not be construed as a commitment by Paychex, Inc. Paychex provides such information as a service and is not implying its endorsement of, or agreement with, such opinions, information, analyses, recommendations, or conclusions. If legal advice or other expert assistance is required, the services of a competent professional should be sought.

About Paychex

How Paychex Can Help

Paychex, Inc. is a leading provider of

integrated human capital management

solutions for payroll, human resources,

retirement, and insurance services.

By combining its innovative software-

as-a-service technology and mobility

platform with dedicated, personal

service, Paychex empowers small- and

medium-sized business owners to

focus on the growth and management

of their business. Backed by more than

45 years of industry expertise, Paychex

serves over 650,000 payroll clients

as of May 31, 2018, across more than

100 locations in the U.S. and Europe,

and pays one out of every 12 American

private sector employees. Learn

more about Paychex by visiting

www.paychex.com, and stay

connected on Twitter and LinkedIn.

payx.me/freedom

800-401-9304

Paychex has the technology, services, and experience to bring a comprehensive human capital management solution to your business. Our products address the time-consuming administrative tasks that may keep your HR department from becoming a full-time partner at the C-suite level. We invite you to review our wide range of business solutions and contact us for more information.