If you’ve been managing payroll for any length of time, you know just how time-intensive it can be. That’s one reason it’s so important for companies to make sure their payroll system is both efficient and accurate. If it’s not, you could end up logging extra hours on redundant tasks and error correction.

This is the reality most small and medium-sized businesses face. It’s no surprise, then, that so many are choosing to outsource the work to a payroll provider. Outsourcing can free up your resources, including your team’s time.

If you’re not sure how payroll outsourcing operates, this guide is for you. It will help you understand exactly how payroll outsourcing works and how it could help your business.

What Is Payroll Outsourcing?

Administering payroll is a full-time job. Some larger companies will have a whole department or full teams dedicated to managing payroll. The larger your workforce, the more this makes sense.

The average business owner may feel they can handle payroll for the handful of employees they have. Even with fewer employees, managing payroll can still be time intensive. You need to calculate payroll, provide reports, set up direct deposits, and manage your legal compliance and tax filing.

Other HR tasks overlap with payroll, such as compliance, worker’s compensation, and benefits administration. That’s a lot to put on any business owner or payroll professional’s plate.

That’s where a third-party payroll provider comes in. They’ll take over these tasks, overseeing them while you attend to other important jobs on the to-do list.

How It Works

The first step in outsourcing your payroll activities is finding a provider. To do this, you’ll have to do some careful research. Check online reviews, talk to your colleagues about the companies they recommend, and compare quotes.

Once you’ve selected a provider, you’ll need to set up an account. A payroll report will allow the provider to access your payroll information, such as number of employees and the hours each of them work. Vacation policies, sick days, benefit co-pays, and more also go into calculating payroll.

With this information in hand, the provider can now run payroll for your company. They then look after details like compliance, payroll tax remittance, and reporting. Depending on the company, they will also disburse payroll funds from your account to make sure everyone is paid on time.

No Two Payroll Companies Are the Same

As mentioned, you’ll need to do some careful research before you sign up for payroll outsourcing. There are many different providers offering different solutions. No two companies will offer the exact same services.

The very first thing you should do is make sure you know your payroll goals. A small business with a few employees has very different needs than a large company with thousands of workers. Some companies offer benefits and pension plans, while others don’t. If your business operates in more than one country, you will require a payroll provider with knowledge and services on an international scale.

With a better understanding of your needs, it becomes easier to find the right payroll partner for your business.

As you search, be sure to ask about key factors that will make a difference in your partnership. How long has this company been providing payroll services, and how well do they know the market? Do they offer services beyond payroll, or will your company outgrow the service in a few months?

Finally, always emphasize customer service. The best payroll providers offer superior customer service to help you ensure payroll is conducted the right way, whether you’re running payroll once a month or once a week.

With a qualified provider on your side, payroll can be simpler than ever.