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Why PEOs Dominate Payroll Outsourcing

Why PEOs Dominate Payroll Outsourcing

Many small and mid-sized companies outsource payroll functions without fully understanding the payroll mistakes and resulting penalties they could face. Payroll-related errors and incorrect tax filings can put businesses in hot water with government agencies and risk costly fines. 

Payroll is also a time-consuming process. It takes away from your HR team using their resources to attract and retain top talent in your industry. When the salary of your in-house HR team is taken into consideration, the most cost-effective solution for you is to outsource your payroll administration. When this service is provided by a Professional Employer Organization (PEO), it multiplies your benefits and ROI

PEO Payroll Outsourcing Saves More Time

HR administration duties can be all-consuming. Depending on the size of your company, you may have just one person managing all these tasks. Even if they are not telling you, they are probably underwater and not giving any individual job the time and attention it needs. Besides the inevitable mistakes that arise, these tasks do not generate any revenue for your business. Outsourcing non-revenue producing tasks like this allows your team to focus on increasing revenue and growing your business. 

Besides payroll processing, PEOs also remit payroll taxes to government agencies. You get access to other important services such as:

  • Quarterly and annual tax reports
  • Year end W-2's
  • Child support, garnishment, and other tax levy administration
  • Employment and income verification
  • Detailed payroll and cost reports

Through your PEO, you also gain access to payroll technology that merges payroll, benefits administration, and employee onboarding into one, easy to use platform. 

Comparatively, a payroll provider can only process your payroll. They cannot even remit payroll taxes on your behalf.

PEO Payroll Services Save More Money

As a small or mid-sized company, you have many options for outsourcing your HR. But only one of those options consistently provides a positive ROI — a PEO. Because payroll outsourcing services are not usually ROI positive, your PEO overcomes that through other service offerings.

When you partner with a PEO, you gain access to their employee benefits package, workers' compensation insurance premiums, in addition to all of the HR administration duties they can take off your shoulders.

Payroll Service Providers Keep You Partially Compliant

The Fair Labor Standards Act (FLSA) governs businesses and helps to ensure employees are classified correctly. Small businesses often find themselves in hot water facing FLSA violations through little fault of their own — the law is complex and confusing.

Most payroll outsourcing companies will only help you with FLSA compliance, leaving you on your own for the dozens of other federal, state, and local regulations.

PEOs Keep You Totally Compliant

A PEO can provide your small business full compliance under the FLSA, OSHA, ADA, ACA, and more. Your PEO will ensure you remain compliant with all of your state and local regulations. Payroll service providers miss the mark here.

A PEO can help you avoid costly mistakes, such as:

  • Payroll errors and omissions
  • Tax filing delays and omissions
  • Tax rate changes
  • New legislative changes to employment laws
  • Employee and contractor classification

PEOs employ HR experts who review your business needs and help you stay compliant. One of the most challenging areas for small businesses is keeping up with recent changes in employment laws. A PEOs in-house HR experts will stay up to date on these changes and help your company make adjustments to avoid costly fines and penalties.

What to Look for in an Outsourced HR Solution

Outsourcing payroll seems like a good option for small and mid-sized businesses. You get to remove some complex and time-consuming tasks and let your internal team focus on revenue generating activities. However, payroll is just one small slice of the pie when it comes to administrative burdens of HR. Outsourcing just payroll can only help in limited ways.

That’s why so many are turning to PEOs for their payroll processing needs. PEOs provide all the benefits of a payroll processor as well as a multitude of other services. This ranges from benefits administration to workers’ compensation insurance.

If the goal is to relieve administrative burdens, then outsourcing payroll alone is not enough. Only a PEO can deliver the real savings in time and money that your business needs.

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