Once you decide on to out-source your payroll it will be time to choose the right service for your needs. Understanding the different types of payroll companies and how they function will help you choose the one that will work best for your company and for your budget.
Professional Employer Organizations (PEO) - sets up the payroll services by hiring the company’s employees. The PEO becomes the employer of record and leases back the employees under contract to the original employer. This is often known as co-employment or employee leasing. PEO’s operate in all 50 of the United States and in several other countries around the world.
By combining employees of multiple smaller companies under one organization the PEO may be able to qualify for lower premiums on health insurance plans and other benefits that the co-employers can then pass on.
Business Process Outsourcing (BPO) – companies that are designed to handle non-essential day to day business including human resources, document management and even customer service. Shifting time consuming activities to an outside source offers companies more flexibility within their current organization.
Online Payroll Services – online services offered by outsourcing companies for business looking for the right cost effective payroll alternatives. Using online services allows a business to save even more when choosing to outsource payroll or other administrative functions.
Traditional payroll systems can be expensive, difficult to run (or require special training) and often take up a great deal of time from the administration. Many small and medium sized businesses are finding the perfect solution to this problem through outsourcing.
When looking for the right payroll solution a business needs to consider a few factors.
What are the benefits to choosing this outsourcing alternative? Some companies can provide additional benefits beyond simple administrative functions (like group health insurance).
How much time can be saved with this choice? Online payroll services may require more hands on activity from the administration than a more aggressive PEO.
What savings will the outsourcing provide? Hiring a company to do payroll may free up an employee to tackle other activities that might require the hiring of more personnel. Be sure to factor in the value of additional benefits that the outsourcing company might provide.
What activities will the outsourcing company be responsible for handling? It can be a better value for the fees if the outsourcing company is responsible for tax papers, payroll, and even payroll analysis.
Small and medium sized business can find a number of benefits with outsourcing some of administrative practices. Payroll can be particularly time consuming. Choosing the right type of company that specializes in the individual needs of the business will help determine the best route for outsourcing.
