Accounting Tips & Advice

7 Benefits of Outsourcing Payroll Versus In-House Processing

Making the decision about whether to outsource payroll or keep it in-house takes a lot of thought and preparation. Construction payroll can be complicated, and you also have to make sure that your payroll costs are allocated appropriately.

Before you decide what to do about your payroll, keep in mind these seven benefits of outsourcing construction payroll.

Benefits of outsourcing payroll

1. Save time

Processing payroll takes time. If you’re just starting out with new software or new employees, there’s the software set up, employee set up, timesheet review, timesheet entry, and then calculating pay and taxes. Depending on the size of the company and how frequently employees are paid, payroll processing can require a part-time or full-time staff member. Administrators can easily spend 20 hours a week just processing payroll and dealing with payroll-related items.

By outsourcing payroll processing, you’ll free up hours that have been spent on these administrative tasks. Instead of staff working part-time to process payroll, they may only need to spend a few hours getting the information ready for processing. Having another company provide these services will give your staff more time to work on the business and serve your customers.

2. Expertise

Most construction companies ask their office staff to provide many services, of which payroll is only a small part. Unless you need a full-time payroll processor, you look for potential admin employees that have multiple skill sets, because admin staff often spend their time working on a variety of tasks. All this means that payroll knowledge is often secondary to other skills.

A payroll service specializes in providing only payroll processing, so you know they have the expertise needed. Also, outsourcing services use the most up-to-date software ensuring that your payroll is accurate and that it’s performed as efficiently as possible. When updates occur, as they always do, you won’t have to spend valuable time getting up to speed or paying your employees to learn a new process.

3. Keep current staff level

As your company grows, payroll begins to take more and more of your administrative staff’s time. You may find you need to hire more staff just to handle the workload from payroll. There’s added cost and time for onboarding a new employee, training them, and getting them up to speed. Spending time and money on acquiring staff and training them keeps you from doing your work.

By outsourcing, you won’t need to add more staff just to handle payroll as your company gets larger. The service will be responsible for expanding to meet your needs. If you outsource, you can easily assess your staffing needs without having to worry about added payroll processing.

4. You’re always in compliance

It’s imperative to your business that you obey and comply with the laws and regulations for record-keeping and storage of documents, especially when it comes to payroll. Payroll laws are always changing, and software updates are a regular occurrence. Keeping up with the latest and greatest is time-consuming and can be confusing when staff are working on other tasks as well.

A payroll service is always up to date on the most current legislation and tax amounts. They’ll inform you of any changes that need to be made in your business practices, and the rest will be handled as part of your service package. You can rest easy knowing that your payroll is in line with the latest regulations.

5. Lower costs

Processing your own payroll means you have to purchase software, pay for a payroll service subscription, and provide staff time for software set up and payroll processing. Not only that, but you also have to maintain the security of your payroll records and ensure that sensitive information isn’t accessible. All these expenses quickly add up, making providing your own payroll processing a giant headache.

Having someone else do your payroll, including providing the software and set up, allows you to spend your resources, both time and money, on the work you do to make a profit. The savings in software expenses and staff time more than pay for the cost of outsourcing.

6. Complicated payroll is easy

Construction companies often work in multiple locations and multiple states. This complicates the payroll process by involving multiple jurisdictions, taxes, and compliance regulations. Keeping track of all this information for each state your company works in can be overwhelming even for the most experienced administrators.

An outsourcing company knows the laws and regulations for each state and what to do when your employees are working in multiple states. Their software is already set up to handle even the most complicated of payroll situations.

7. Certified payroll is effortless

If your company works on public projects that are subject to prevailing wage laws and require certified payroll reporting, payroll processing is complicated. Union companies also have detailed reporting requirements. Setting up a software system to handle certified payroll or union reporting is a complicated process that can take your staff hours to complete. On top of that, not all payroll software provides the necessary reports for this type of payroll, meaning that your staff has to spend extra time compiling the information required.

Outsourcing companies that specialize in construction payroll have the systems in place to handle prevailing wage and certified payroll reporting with ease. You simply provide the information for each project and the processor takes care of the rest. They’ll send you the reports you need with each processing and you simply turn them in to your clients or the union.

Payroll outsourcing saves time and money

Save your company time and money by outsourcing construction payroll. You’ll ensure that your employees are paid correctly, and records are stored securely, keeping your company in compliance. You’ll save staff time and admin costs, making your company more efficient and profitable.

Author Biography:

Dawn Killough is a construction writer with over 20 years of experience with construction payments, from the perspectives of subcontractors and general contractors. Dawn has held roles such as a staff accountant, green building advisor, project assistant, and contract administrator.  Her work for general contractors, design firms, and subcontractors has even led to the publication of blogs on several construction tech websites and her book, Green Building Design 101.

Industry Insight Trends & Technology

Reasons to outsource payroll

Many construction companies are now opting to outsource their payroll because of the significant cost savings and increased number of payroll complexities. There are several other benefits in doing this, especially for small-medium sized businesses that don’t necessarily have the resources for an in-house payroll division. Payroll is often one of the first processes that companies choose to outsource.

Here are 5 benefits of outsourcing, so that you can evaluate whether or not it’s a good fit for your company:

1. Save money and resources

It’s often more cost effective for smaller businesses to outsource rather than trying to support a payroll department. This is easy to calculate. Determine how many hours your employees spend entering in and processing payroll and compare this to the cost of outsourcing to a third party payroll service provider. If you have less than 20 employees in office, it makes sense to outsource. The cost to outsource can be less than $4000/year. Save valuable time getting someone else to manage your ROE’s, year-end packages, deduction calculations, remittances, online archiving, T4s, funds summary, journal entries, government remittances, etc. Outsourcing will also give the current employees managing your payroll more time to focus on other tasks including detailed job costing, workflow, approvals and most importantly reporting. Additionally, as your company grows and you take on new employees, you don’t have to increase payroll resources, which yields a significant savings.


2. Increase accuracy

Passing payroll processing off to professionals ensures accuracy. Third party experts handle your payroll from end-to-end, providing payroll best practices and ensure regulatory and legislative compliance, providing you with the knowledge and support necessary to maximize productivity. There’s no need to fret over meeting government guidelines or the consequences of errors. Payroll experts are often much less likely to make mistakes than in-house staff and in the rare case that they do, you can seek restitution. This is an easy way to reach unmatched levels of accuracy and consistency in payroll and reporting.


3. Ensure reliable and timely service

A good payroll service will have the expertise and resources available to quickly manage even large complex payrolls that involve multi state/province, multi-union and multi-occupation. Also, unlike your employees that may become swamped with unrelated work or go on vacation, a payroll service will always meet your payroll deadlines and if for the unlikely reason they don’t, they incur a penalty and are held liable. Cheques and payments are issued just as quickly as they would be in office.


4. Higher Security, Convenience

Worry less about any internal payroll fraud or exploitation. Payroll services follow strict confidentiality laws and also often use powerful software to detect any inconsistencies or possible payment manipulations. You’re also protected from any office politics resulting from the wrong eyes seeing sensitive information. In terms of additional benefits, your employees can enjoy the convenience of receiving electronic pay slips, expense reimbursements via payroll, and electronic W2s (in the U.S.) and T4s (in Canada).


5. Enjoy Flexible, Scalable & Integrated

Third party payroll services are very capable of accommodating massive changes to your payroll processes that could be caused by company growth or down-sizing, something an in-house department probably wouldn’t be outfitted for. Also, with integration to your existing accounting ERP system, it’s easy to process reimbursements, maintain vacation accrual, sick days, banked overtime and streamline reporting. It’s an easy way your company can become very efficient.