What Happens When You Outsource Payroll?

Noah Caraco November 2, 2022
What happens when you outsource payroll_

Outsourcing payroll refers to delegating a portion or all of a business’s payroll operations to a third party. A full-service payroll provider assists with tax reporting, regulatory compliance, data security, unemployment claims, and running payroll. This means that business owners no longer have to worry about running payroll and can focus their time on other tasks.

In-House vs Outsourced Payroll What’s the Difference

In-House vs. Outsourced Payroll: What’s the Difference?

Payroll processing in-house refers to handling all employee payments internally within a company. These tasks include:

  • Keeping track of timesheets and wages.
  • Maintaining accurate payroll tax deductions.
  • Taking into account any deductions such as retirement contributions and health benefits.
  • Cutting checks and depositing funds.
  • Making sure payments are correct and on time.

An individual administrator or a team manages in-house payroll. Controlling sensitive company data and when paychecks are issued is one of the advantages of in-house payroll processing. Even so, doing payroll in-house still comes with several severe risks, such as errors, incorrect deductions, and non-compliance.

To avoid these risks, you  can outsource payroll operations and rely on a third-party service provider to handle compliance and administrative tasks. This can include filing payroll taxes and processing payments on your behalf..

Due to the time-consuming nature of HR and payroll tasks, many companies outsource these services. As a result of this automation, business leaders can focus on more strategic functions within their organizations.

How Do You Know if You Should Outsource Your Payroll?

Employers may consider outsourcing payroll to a full-service provider if:

  • There is an inability to run payroll effectively due to the lack of personnel and technology.
  • Incorrect or late tax payments have resulted in penalties.
  • Changing employment regulations are difficult to keep up with.
  • There is a lack of compliance with data security and recordkeeping requirements.

Benefits of Outsourcing Payroll Services

The decision to outsource payroll has many benefits. Here are a few to consider.

Improve the Working Environment for Employees

A payroll company can provide employees with self-service portals, direct deposits, electronic payroll records, digital W2s, and convenient ways to update personal information, all as part of the overall payroll process. Additionally, payroll will always be done on time. Payroll services have quality assurance processes to ensure the accuracy and timeliness of payroll.

Invest in a Long-Term Solution

Most payroll services can expand capabilities outside of an internal team, like giving the business access to direct deposits and employee retirement plans. Most payroll services will also prepare W2 forms for their clients, calculate employee tax obligations, and provide management reports. In some circumstances, it is also more cost-effective to use a full-service payroll company rather than hire a full-time payroll specialist or accountant to handle your payroll. Additionally, payroll is subject to a wide range of state and federal legal requirements, constantly changing from state to state. An outsourced payroll company can save you money on legal fees and ensure compliance is handled by a business that specializes in these issues..

Provide a Solution That Is Scalable

Flexible payroll options help employers ensure compliance and track payroll taxes regardless of how many employees they have or how many features they add. It is so convenient for a small business to submit hours, deductions, and salaries to the outsourced payroll provider, who takes care of the rest. 

Have a Data Collection and Analysis Process

With integrations between accounting software and time-tracking applications, payroll, HR, employee benefits, administration, and payroll taxes can all be accurately monitored. As a result of integration, all systems work together and in harmony to increase productivity and the consistency of data. An integrated technology system is crucial to the success of a business as it grows. An integrated system’s benefits include increasing consistency and productivity and decreasing human error.

Payroll with Milestone

With Milestone, you can rest assured that your payroll is handled correctly. The payroll process is one of the most crucial areas of running a business, because the cost of mistakes can be high. If you’re wondering if your small business should outsource payroll, our payroll experts will help you design the right process and use the right tools to ensure success. With customized pricing based on the level of service, the number of employees, and the pay cycle frequency, Milestone can own your payroll function, so you don’t have to. Contact Milestone to learn more about how we can make payroll easy for your company.

Related Content


What Payroll Company Is The Best?

There are many excellent payroll service companies in the marketplace. They all offer different pros and cons, and the best ...

What are the names of payroll companies

What Are The Names Of Payroll Companies?

There are tons of popular payroll service companies, from ADP, to Gusto, to Rain. The best way to find a ...


What Are The Different Types Of Payroll Systems?

The two different types of payroll systems are payroll processors and payroll softwares. A payroll processor is a system where ...

Stay in the know