Three Consistent and Critical Events That Will Convince You to Outsource Payroll
It’s just payroll, right? How hard can it really be? Doesn’t my accounting software calculate payroll for me?
I have a franchise; why would I pay someone to administer payroll?
As an accountant, I have heard these and many other excuses for not using an external payroll service from my clients. Not surprisingly, these same clients ultimately came to me with issues, desperate for my assistance with solving problems after they arise. I see three events repeatedly that lead small businesses and franchises to outsource their payroll. In order of stress levels that each cause for the small business or franchise owner, the critical events are:
1. Payroll audits
2. Payroll errors
3. Legislative changes
I will first explore each of these areas in more depth and then discuss the main advantages of outsourcing payroll to a
provider like Ceridian.
Long ago, I lost count of all the payroll issues that I have been called in to fix after the fact. I once took over an accounting practice that took a fairly liberal approach to payroll and legal requirements. I was unexpectedly faced with several concurrent payroll audits within a month of taking over the practice. I can tell you with certainty that the cost and stress of payroll audits outweighed any perceived savings by doing payroll in-house. The
retired accountant could have saved himself and his clients a lot of stress if he had simply used a professional and reliable external source for his clients and their payroll needs.
From the client perspective, they were hurt because they felt that their accountant hadbetrayed them – had he not already retired, they would have left him because of the payroll audits.
Payroll Errors – the Hidden Costs of Doing Payroll Yourself
Calculation errors can have hidden costs. Have you considered the cost of the following?
• Late filing penalties
• Interest charges
• Disgruntled employees
• Added stress dealing with unresolved issues
• Staff time correcting payroll errors and dealing with auditors
• Management time deferred dealing with the above
• Frequent errors may lead to your business being flagged for audit scrutiny
You may or may not have had to deal with unhappy employees in the past due to payroll issues. If you have, you know that payroll is a very personal and often touchy subject for employees.
I have seen these payroll issues firsthand with two of my former employers. In one case, the internal bookkeeper
wanted to reduce costs, so she did not renew the company’s payroll software. Instead, she manually calculated payroll. Unfortunately, she was not fully aware of the rules surrounding deductions and she withheld approximately five percent too much from each employee’s paycheck. The errors were seemingly insignificant and management decided to adjust the error on a subsequent paycheck. The error and the decision to ignore it cost the company dearly; employees were understandably upset and from that point onward, very militant toward payroll calculations – no further errors were tolerated.
In a second instance, I was working for a smaller company. The person responsible for payroll was on vacation and the owner-manager decided to wait until her return to pay the employees; it was only a three-day delay, after all. Unfortunately, this company had employees who had pre-scheduled payments that were set to come out of their accounts and the delay caused significant inconvenience for the employees. The employer had to conduct major damage control and pay additional bank charges incurred by the employees. This slight delay caused unnecessary headaches for employees and they made sure the employer knew exactly how inconvenienced they felt.
Change is the one constant in today’s business world. It is inevitable that legislative changes will impact your
franchise, whether you know about them or not. Labor laws may not change as frequently as others, but the impact of missing a change can be costly. For example, government subsidies may be missed or grant programs overlooked.
Ignorance or lack of awareness are not acceptable reasons for exceptions or forgiveness.
The inevitable advancement of technology and legislation will require great diligence on an employer’s part going forward. Do you have the time to attend training or sit through updates? If not, you may be subjecting your business to missed opportunities, costly compliance errors, and even potential legal liability for errors and omissions.
Advantages to Using an Outside Payroll Firm
As discussed, payroll audits, errors, or missed legislative changes can cause significant stress and potentially significant costs to franchises. The cost of hiring an in-house person to handle payroll and human resources can be too large for many franchises to bear. The following are some of the benefits that you will see if you hire an external payroll service provider, such as Ceridian:
• Regular issuance of paychecks – even if key personnel are on vacation
• Ability to offer direct deposit to employees
• Timely payment of source deductions
• Filing tax forms without stress
• Flexible reporting solutions for employers
• Self-serve access to pay stubs and other reports for employees
• Administration of benefits beyond the paycheck
• Calculation and tracking of vacation pay
I have encountered payroll errors, payroll audits and legislative changes throughout my career and ultimately, they always lead to employers bringing in an external service provider to manage their small business payroll. Why not save yourself the trouble of the experiences above, learn from the mistakes of others and leave payroll to the experts? As a franchise owner or manager, you should focus on what you do best – running your business.
To learn how a fully outsourced payroll solution can benefit your clients and business, review Ceridian’s whitepaper
called Business Process Outsourcing Payroll.
Jeff Borschowa is an accountant and Ceridian Small Business Payroll consultant
For more information visit: www.ceridiansmallbusiness.ca