Startups face hundreds of challenges, everything from product development to
marketing to sales. Keeping employees confident and motivated in a new venture
is critical to success, and anything affecting their pay can undermine employees
attention to the mission. One function that can be easily delegated to a third
party is payroll. With a payroll service, both staff and management are free
of weekly or bi-monthly stress and distraction.
Payroll services are not just a good idea for startups. Almost 25% of companies
use a payroll preparation service and that percentage is expected to increase
according to industry analyst firm IDC. The reasons both large and small companies
use payroll services are compelling.
No Payroll Software to Buy and Maintain
When companies make the decision to outsource payroll, one of the most immediate
cost offsets is that there is no software to purchase, install, maintain,
support and upgrade. And that means a cost savings in IT labor too.
At the same time, many payroll
service companies offer integration into back
office accounting systems and may even provide some customization. Additionally,
payroll services continually upgrade their offerings to stay competitive, a
benefit that subscribers do not pay for directly.
Bigger Payroll Doesnt Mean Bigger Resources
With payroll services outsourced, as companies grow, they do need to add additional
staff to support payroll. Likewise, should business contract, client companies
do not need to worry about reassigning tasks, layoffs, or unemployment insurance.
Payroll Services Allow Companies to Focus on Core Business
When companies use a payroll
preparation service, they gain back the time they
would otherwise spend on this activity, estimated to be approximately eight
to ten hours per pay period. This time can be used instead to promote the
mission of the business.
Delegate Payroll Preparation Responsibility to Employees
With the implementation of software as a service (SaaS), companies are able
to delegate to the employees themselves the gathering and submission of hours
worked. Employees log in to the payroll
service company Web site and complete
electronic timecards. The manager is then notified that the completed cards
are ready for electronic review. After reviewing them, the manager can approve
or send back to the employee any card that is not accurate. There are defaults
for submission, approval, and correction, so employees need not worry that
they will not be paid if their manager is not available to approve their
Most service providers can also accommodate variable pay such as commissions
Offer Paper Paychecks or Direct Deposit
Clients of payroll
services can choose to have paper checks cut and delivered
for distribution or provide direct deposit. Either way, the service calculates
the periodic and annual federal and state withholdings as well as contributions
to health and retirement plans.
Eliminate Payroll Headaches like Regulatory Compliance
Perhaps the biggest benefit to companies that choose to outsource payroll is
that that the payroll preparation service is obligated to keep abreast of and
comply with all mandated regulations. Although ignorance of legislation does
not relieve client companies from compliance, the burden of penalties, if any,
shifts to the payroll