It is always a sound business practice to compare the benefits of a service or product with the cost that will be required. Choosing a payroll outsourcing company should follow this same premise. The benefits for one business may be different for another but they must outweigh the costs to make the decision good business practice.
Each week Mr. Smith pays an employee $15 per hour for his experience and knowledge with numbers. This employee takes 10 hours to complete all of the paper work required to create payroll for the 20 total employees that work for Mr. Smith. Mr. Smith is spending just under $200 each week (after payroll taxes and other expenses) to keep this one employee.
After searching around Mr. Smith finds that average payroll outsourcing company would charge around $120 for weekly payroll plus an additional $2 per employee. The total costs for payroll would be down to $160 each week giving Mr. Smith a savings of $40 each week (or over $2000 each year).
This scenario is not uncommon. Most experts agree that when small businesses outsource payroll the savings will likely equal 20% or more.
As a small business with only a few employees, Mr. Jones is unable to provide health insurance as a benefit. The cost for individual policies is just too expensive. Even paying just half of the cost, a family health insurance policy could cost as much as $250 each month per employee.
Mr. Jones has been talking with several different payroll outsourcing companies. One particular type of company, known as a PEO, would actually hire his employees, do their payroll and then lease them back to him. Because they have a large number of employees on their books these PEOs are able to offer group health insurance. Mr. Jones would now only have to pay around $170 each month for each employee. This one savings could add up to almost $1000 in savings for each employee.
Group health insurance rates are not only less expensive, but the negotiation power of the larger numbers allows the group to get the best benefits under the policy as well.
Ms. Brown has been saving money by producing the weekly payroll for her business on her own time. She currently employees just 10 full time workers. It usually takes her around 8 hours to complete the payroll each week. Because she is dealing with administrative needs, she has to have someone take her place on the floor of the business. The cost for the replacement is $55 each week.
After being out sick for a couple of days and having to delay payroll, Ms. Brown takes some time to look into payroll outsourcing. The average company she locates charges just $4 per payroll check – or only $40 for Ms. Brown. This comes out to a savings of almost $800 each year.
Not only are their financial benefits to choosing a payroll outsourcing company but there is no risk of delays because of sick employees or a change of employee.
It will not take long to discover that the small business can benefit in a number of different ways by choosing a payroll outsourcing company to handle administrative needs.
