OneSource Business Solutions Blog

The Problem with Doing Payroll In-House


When companies first start, every person involved wears many hats and holds many duties. These duties include payroll, one of the most important tasks in a small business.

Outsourcing HR is becoming more and more popular today as companies see the benefits of using HR experts. Instead of placing this task on one person internally, by outsourcing your payroll needs to a Professional Employer Organization (PEO), you can remove this challenging task from your internal team. The difficulties of payroll and tax remittance require extreme attention to detail and time to ensure absolute accuracy. Keeping your payroll in-house opens your company up to employee lawsuits and fines.

Increased Chance of Mistake

Payroll is increasingly complex, and mistakes happen. Even innocent errors can result in costly fines and penalties. 

Some common payroll mistakes include:

  • Overtime miscalculation
  • Incorrect employee classification
  • Failure to properly withhold child support, garnishment, and other withholdings
  • Not having a review process in place

To employees, a payroll mistake is a sign of trouble in the business.

Partnering with a PEO, you can avoid this perception by ensuring accuracy with every single paycheck. Your PEO houses payroll experts who calculate and review your payroll every time to ensure accuracy. 

When you do your payroll in-house, you likely put this task on just one person. If that person is out sick or on vacation, you have no backup. But a PEO does. They have a team of payroll experts who can process your payroll for you without missing a beat.

Reduce Risk of Late Payroll

Just like an incorrect paycheck will make employees start looking for another job, so will a late paycheck. It's just another sign of trouble inside the business, even if that perception is wrong.

Internal HR teams of all sizes are burdened with competing tasks, all of which may be of high importance. Payroll is just another task, and trying to rush through it can easily result in mistakes. Without a safety process to ensure at least two people review payroll for accuracy, mistakes can and will happen.

You can avoid these mistakes by outsourcing your payroll needs. Through a trusted PEO partner, you can ensure your payroll is accurate so your employees do not worry about whether they will receive their paycheck on time. This not only gives them confidence in the sustainability of your company, but it also helps them engage more and remain loyal to your organization.


Compliance and regulation are vital to your business. Taking action before you get into trouble will help to keep your profits and assets in place. Reacting is always more costly.

Federal, state, and local employment laws are constantly changing. Keeping up with these changes and how they impact your company is a full-time job. Trusting this job to one internal employee places a mountain of pressure and responsibility on them. If they have other duties besides compliance, you risk serious fines and penalties when they inevitably make a mistake or miss a significant legislative change.

A PEO, on the other hand, employs a team of HR experts to monitor potential legislative changes as it relates to labor and employment laws. They consider these laws before they go into effect so they have time to determine what, if any, adjustments need to be made to your business and processes. Then they work alongside your internal team to make these changes so your company remains compliant.

Trust the Right PEO with Your Payroll

In-house payroll presents countless opportunities for mistakes. Your solution is to outsource this and other HR functions to a trusted PEO partner. Your chosen PEO can work with you to ensure that your company is properly protected and you do not encounter costly and embarrassing payroll mistakes. 

Which HR Functions Should Your Business Outsource?