Creating a meaningful, successful, and mission-driven business requires constant attention, a drive towards growth, and plenty of late nights. But what happens when you're forced to abandon growth in favor of administrative responsibilities? Over one-third of small businesses struggle with cash flow, and those struggles start with payroll. The simple truth is this: payroll is a time-consuming, resource-draining, and headache-inducing task for most small business owners.
So, is it any wonder that a recent EY survey suggests that over 85% of businesses outsource payroll? Outsourcing payroll can be a serious boon for your business. While outsourcing can certainly save you money (especially if you make payroll mistakes), it also provides a wealth of tangible and intangible benefits that can help you grow faster, smarter, and with more purpose.
Here are some of the key reasons your business should consider outsourcing payroll.
The average business owner spends 5 hours per pay period on payroll taxes alone. Unsurprisingly, 47% of businesses admit that late payments are their number one payroll issue. A few payroll mistakes can sink your business. According to HR Dive, 49% of employees start looking for a new job after just two payroll issues. Here's the truth: most business owners don't have time for payroll. One-third of small or mid-market business owners work over 50 hours per week. You shouldn't have to push fifty hours with a cup of lukewarm joe in your hand only to focus on the redundant, complicated, and manually-intensive payroll process.
Payroll outsourcing instantly alleviates your time concerns. Your payroll partner will completely take over your payroll needs, giving you the freedom to focus on more critical objectives — like growing your business.
HR is a significant cost to businesses. With the average HR professional making around $70,000 per year, creating a cohesive human resources department can be financially draining. In fact, 70% of small businesses put their HR needs in untrained hands. Why? Because they can't afford to hire a full suite of HR specialists. So, instead, they simply hand HR objectives over to employees outside of HR. Again, that can (and almost always does) lead to mistakes. Those simple mistakes can lead to retention issues, revenue leakage, and compliance problems. And in a world where small businesses are struggling to compete on wages and benefits with larger companies, retention issues are the last thing you need.
Outsourcing your payroll immediately reduces your internal HR needs. Of course, if you partner with a Professional Employer Organization (PEO) that handles a variety of HR tasks — including payroll — you can further reduce these internal HR requirements.
As a business owner, data security is top-of-mind. Beyond the avalanche of data privacy omnibus bills (e.g., GDPR, CCPA, etc.) and ever-evolving data privacy standards, there are legitimate internal data security risks that extend well beyond compliance. Hackers attack a business every 39 seconds. Unfortunately, small businesses account for 28% of those hacks. Breaches cost enterprises around $4 million in damages. But small businesses don't get off scot-free. The average cost of a data breach for a small business is over $200,000. And 60% of small businesses fold within 6 months of a successful breach.
Payroll can be a source of these breaches. The pure scope of employee data that's holstered in your payroll software and processes is staggering. When you're already struggling to handle payroll solo, ensuring that your security policies are up-to-date may be unfeasible.
Luckily, outsourcing payroll helps you bolster your security posture. Since your HR partner will completely handle your payroll needs, they'll keep employee data in their hyper-secure ecosystem. Remember, outsourced HR partners like PEOs work with many businesses, and they have the liquidity and experience to invest and maintain best-in-class payroll software with outstanding security policies.
Want to know why the majority of businesses outsource payroll? Believe it or not, it's not labor savings, security, or ROI. It's compliance. Fifty percent of companies (big and small) outsource payroll to mitigate compliance risks. Thirty-five percent of businesses admit that their biggest payroll challenge is "the accuracy of withholdings." In fact, internal HR teams spend an average of 36 hours per week on compliance-related activities. Payroll is filled with compliance challenges, and navigating those nuanced and granular compliance needs can be a headache.
Outsourced payroll partners can help. Not only will your HR partner help you maximize the efficiency and accuracy of your payroll, they'll also glue your payroll processes to regulatory standards. The last thing you want to worry about is compliance issues. Working over 50 hours a week to grow your business is demanding. Watching your revenue leak off your financial statements due to fines is the very last thing you need to deal with.
Over 180,000 companies partner with PEOs for a reason — they provide far more than payroll. With an average ROI of 27%, partnering with a PEO helps your business grow 9% faster than your non-PEO-leveraging competitors. In addition to payroll, PEOs provide services, like:
As you can see, payroll is the cornerstone of the many services that a PEO offers to help you grow your business.
As a business owner, you have plenty on your plate. You have a business to grow, employees to bond with, and cash flow to manage. Don't let payroll be the thorn in your side that prevents you from growing. Partnering with a PEO can save you time, money, and compliance headaches on payroll processing. Let's be honest: payroll isn't glamorous, but it is important. Don't let payroll hold you back from doing what really matters — growing your business.