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Facts about Outsourcing Payroll vs. Completing Payroll In-House

Published: September 12, 2013

Customers in the healthcare arena have two choices for payroll: outsourcing or bringing it in house. We frequently get asked “which one is best for me?” by our customers. For every customer, the answer to this question may vary, but the facts about bringing payroll in-house do not change. Here are the top three myths and facts about outsourcing payroll vs. bringing it in-house that may help you choose the right method for you:

Myth: “If I outsource my payroll, I do not need to worry about payroll any longer.”
Fact: You must still collect and input items like hours work, department, shift and PTO. All of this data is required to complete payroll calculations. In addition to gathering this data, you must meet the outsourced payroll company’s deadline. If there is an issue with meeting this deadline, your payroll may be delayed. In outsourcing, many times an error is not caught until an employee is paid. An advantage to in-house payroll is that the error can be caught while processing the payroll. A customer knows their employees and payroll data better than an outsourced company.

Myth: “In-house payroll systems are more expensive to run than just having it outsourced.”
Fact: With the every changing face of ERP systems, the cost of in-house payroll systems has gone down drastically. With outsourcing, you are “renting the software” vs. owning it. An ROI should be completed to look at the true cost of outsourcing (knowing that you still need to gather and submit the data) vs. doing the whole process in-house. You should also try and calculate the cost of a delayed payroll in case you cannot meet the deadline imposed by the outsourced company. Other things to find out about your outsourced payroll company: additional costs for W-2 filings, reprinting of checks, reporting capabilities, and\or service hours.

Myth: “An outsourced payroll company is the best way to keep in compliance with tax updates. My employees are not tax experts like they are.”
Fact: Many in-house payroll systems have automated tax table updates. They also have the ability to electronically file your filings.

Every customer is different and there is no one right answer that I can tell. As you are making your decision, you should ask a lot of questions and think about payroll reporting, FTE budgeting, confidentiality of your employee data, cost allocations, etc.

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