How Much Does Payroll Outsourcing Cost

By Ken Zwerdling on Oct 08, 2017

How Much Does Payroll Outsourcing Cost

When considering the pros and cons of outsourcing versus in-house payroll, it is essential to identify the specific payroll outsourcing costs. According to an article in Entrepreneur Magazine, basic payroll services generally range in cost between $0.80 and $2.00 per check, along with a flat rate for each account[1]. Many payroll providers will charge a flat fee by the month or by the pay period, according to the different services offered. Additional fees may include a charge for setting up the company’s account, hiring or firing employees, and changing information.

The costs of outsourcing payroll may sound high initially, especially for companies with employees, but there are also significant cost reductions available through outsourcing that are all too often overlooked.

The most obvious cost savings come from not supporting an in-house payroll department. Without an in-house payroll department, your company avoids the costs inherent in maintaining employees, office space, time, and technology to keep up with payroll, all of them coming together to account for many implicit and explicit costs. Especially with the ever changing and new advances in technology, your company is freed from the burden of continuously investing in new software to stay at the forefront of the requirements. Small businesses with only a few employees in particular find that outsourcing is much cheaper than hiring in-house employees to handle payroll services.

Outsourcing payroll can also prove to be tremendously cost-efficient for larger businesses. Even companies that can afford an in-house payroll department often find that outsourcing payroll greatly reduces costs due to economies of scale. With more employees, payroll providers provide the same services for less cost per capita.

An outsourced payroll also ensures that your company will not be liable for IRS penalties or fines due to errors made in tax withholdings or employee payments. It is the provider’s responsibility to ensure that your payroll is compliant.

Finally, outsourcing your company’s payroll saves costs by providing better security against internal fraud. When only one or a few people manage payroll services your business faces higher risk from fraud. Outsourcing your payroll can potentially protect you from even greater financial risks.

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