The IRS has a system called the Electronic Federal Tax Payment System (EFTPS) to facilitate that. Businesses are assigned an employer identification number (EIN) that needs to be provided to the payroll company if you’re going to outsource. IRS correspondence is always sent to the primary business, not the third-party provider. You can change your address to the payroll company, but the IRS does not recommend that.

Read up on regulations and tax obligations before outsourcing

In other words, if you’re hoping to use a third-party vendor as your de facto HR department, OnPay is not the right pick. Despite this, OnPay’s software is surprisingly robust and makes a solid case for its use, all on its own. Gain time, money, peace of mind, and expertise across HR, payroll, workplace safety, compliance, and benefits with ADP. No, outsourcing is usually the more affordable option — especially for small businesses. If you don’t have the funds for new infrastructure and full-time payroll staff, outsourcing can help why would a cash account have a credit balance you avoid a big financial outlay.

Disadvantages of outsourcing payroll

In 2024, a wide selection of “payroll outsourcing providers” are to be found both domestically and internationally. While different companies will have different criteria for evaluating a good match, they all must ensure a provider maintains adequate protections for employee data and complies with relevant regulations. In the early days of strategic outsourcing, companies were most comfortable hiring away low-skill tasks distant from sensitive business areas. Nowadays, many companies do the opposite and outsource critical functions such as customer service and money-management tasks.

Employee and candidate experience

1. Before diving into whether or not outsourcing payroll is the correct decision for you and your business, look at some of the downsides.
2. It offers practical information concerning the subject matter and is provided with the understanding that ADP is not rendering legal or tax advice or other professional services.
3. Keeping everyone in the loop helps manage expectations, ease any worries or uncertainties, and ensure your team feels informed at every step.

Run payroll around the world from one platform, streamline international operations, and eliminate the ongoing admin of local compliance, taxes, benefits, and more. Before partnering with Deel, they faced many challenges paying workers across borders, as it had to be done manually without a centralized system. Their processes took a lot of time, and they lacked a network of experts to help them navigate international compliance. The penultimate entry on the list, OnPay, is a software-only payroll solution, offering only self-service online portals.

All the benefits of outsourcing payroll are also reasons to outsource payroll. Here are some questions to ask yourself if you’re wondering why you should use a payroll service or professional. Reputable payroll providers will have strong security systems amazon seller accounting and processes to ensure the safety and security of sensitive payroll data.

Inaccurately filed federal payroll taxes may result in penalties and legal issues with local government agencies. These days, just about any service of this level of importance comes with some kind of software platform. It just makes things easier for everyone (at least in theory). Keep in mind, though, that the same concerns mentioned above also apply to software capabilities.

Our last list entry is a bit of a midpoint between software-only providers like OnPay and more full-service providers like the ones mentioned further up. But they also offer extensive support and administrative services to help teams minimize the amount of work required internally to keep HR functions running. As mentioned before, these are further areas where a misstep by a payroll outsourcing provider can become a problem for both the provider and the client company.

Payroll outsourcing certainly has advantages, but no single resource can point a company toward guaranteed success with payroll management. Company leaders should not take a decision about outsourcing payroll lightly but should understand its convenience and financial savings. A solid understanding of payroll outsourcing’s pros and cons, along with accurate information on existing payroll management costs, can offer helpful guidance. Finding a trustworthy third-party provider goes a long way, but a company can’t just partnership distributions inside and outside basis pass off any payroll mistakes that arise as the fault of its provider and move on. The client company also remains liable for tax remittance whether or not it has outsourced this particular payroll function, meaning it’s on the hook for any errors even if it’s not immediately responsible.