Payroll outsourcing is a business practice that involves contracting with a business service to handle all functions related to a company payroll. Using an outsourcing service makes it possible to manage the payroll process without the need to maintain a large payroll department. Payroll service providers manage such diverse functions as the calculation of wages and salary, withholding of taxes, the distribution of withheld funds to the proper government agencies, and the direct deposit of net pay into the bank accounts of employees.
There are many reasons why a company may choose to go with a payroll outsourcing option. The most common is to save time and money on the handling of financial tasks associated with a payroll. As a result, there is no need for anyone to spend a majority of the workweek calculating hourly wages, taxes, and dealing with various types of withholding issues.
Another benefit to using a payroll outsourcing service is that the employer does not have to keep up with changes in regulations that impact the calculation of taxes. Since the outsourcing service constantly updates their information to comply with current laws, the employer never has to worry about incurring late charges and other penalties, due to an improper calculation of the taxes due. This benefit alone can save a large corporation a significant amount of money over the course of a year.
Payroll outsourcing also prevents an employer from having to deal with technology woes. Since the payroll is processed off-site, there is never a need to upgrade payroll software or spend time and money on program or hardware glitches or any of the system issues that can occur and slow down the payroll process. As a result, employees are consistently paid on time.