The average number of employees per American business is 22, which means (statistically speaking) that most businesses will have fewer than that when you consider massive outliers like Amazon and Google.
Outsourcing your payroll will save you money, but not if you outsource it to a service that caters to these giant companies. Finding a payroll service that’s suited to your business is the best way to keep the cost of payroll lower.
Many factors contribute to the total cost of payroll services. Check out this handy guide to find out what contributes to the price tag of a payroll solution.
Staff Size, Differentiation, and Dispersion
The bigger a company’s staff base is, the more work payroll is per cycle. Each additional individual costs a little more time and money to calculate hours for, turn those hours into payment, and then process the payment.
This remains simple enough if your staff is a monolith, but as businesses grow, their hierarchies get more complex and they may even open up new locations or hire remote staff. All these extra complexities increase the cost of payroll. If you want to keep costs low, consider the types of payroll systems that are suited to your organization’s size and structure.
Payroll Cycle Frequency
Another factor that can increase costs is how often you pay your employees. This is because the more often you pay, the more frequently you have to recon the total worked hours and calculate pay, benefits, and taxes.
Something that complicates this more is if different types of staff get paid in different cycles. For instance, if you have freelance staff that gets paid weekly and management that gets paid monthly, this indirectly boosts the costs of payroll for your accounting and HR departments.
A great way to get around this is to outsource simpler payroll tasks. This can be for overseas freelancers or contractors who pay their own taxes.
Benefits and Tax Calculations
Offering non-cash benefits is one of HR’s best ways of attracting employees. Some of these are tax deductibles, others are not, and working that out is where the problems lie. The aim is to balance your payroll system so that your tax savings are greater than employee payroll costs.
You can deduct most benefits and fringe benefits, which leads to lower taxes. However, working out the effect of those deductions on your tax account and hiring a tax professional to help you still costs you something. The best payroll options to help you with these cases are the ones that do those calculations in the background.
The Cost of Payroll Services Doesn’t Have to be High
The takeaway from all this is that the cost of payroll services depends on how complex a job it is to do the capturing, analysis, and payment each cycle. The more complicated this process is, the more expensive your payroll options will become.
Staff size and location play a huge role in complicating these processes. Having a higher payment frequency and calculating taxes and benefits also add complexity.
Outsourcing payroll doesn’t have to be so expensive that it blows your profit margin. Finding payroll systems for your business is a great way to cut costs. For excellent payroll solutions for small businesses, contact us today.
