October 29 2015 0comment
paychex logo

No. 1 Reason to Outsource Payroll & HR – Compliance and Regulation

This is the surprising result of an online small business survey conducted by Paychex, Inc., one of America’s leading payroll providers and HR outsourcing organization. The survey questioned over 300 SBO’s about payroll, benefits and human resource administration. The respondents consisted of 339 small business owners (CEOs of U.S. companies with fewer than 500 employees).

Reason # 1 – Peace of Mind

Peace of mind was the number one reason most given in the Paychex Small Business Owners Survey. Overall, 40% of survey respondents said the greatest benefit they received from outsourcing their company’s payroll is the “peace of mind” it provides knowing that compliance with regulations and timely reporting was being performed by a qualified professional service organization. The number of positive responses increases to 63% for those executives who manage businesses with 20-99 employees.

Reason # 2 – HR Expertise

The number two reason given by company executives for outsourcing the payroll processing was expertise. 23% of these small business owners sited payroll automation, and relying on the advice from professional payroll experts as the reason why they utilize the services of a third party payroll provider. Only 19% of those surveyed stated that saving time and money was their decision for outsourcing their small business payroll administration.

Another Surprising Finding

While the Paychex survey focused on the motivation that small business owners identified for taking advantage of (ASO’s) administrative service organizations to outsource their employee payroll, an even more surprising revelation was the number of CEOs who stated that they were not using the services of a 3rd party payroll company to handle their payroll check accounting, compliance, distribution and reporting functions. Their survey revealed that 56% of small business owners reported doing payroll on their own, 65% said they are handling HR administration themselves, and 59% reported taking care of their own benefits administration.

Unanswered Questions

Maybe the way to state it more accurately would be “Unasked Questions”. What I find most revealing in the Paychex Small Business Survey is the number of small business owners who answered that they are still processing payroll on their own. I would like to see Paychex perform a follow-up survey with a focus on identifying the reasons for such a surprisingly large response.

My 30 plus years of experience advising and consulting for entrepreneurs and small business owners tells me that privacy would be one of the primary reasons given for not working with any 3rd party provider of payroll and HR services. Protecting confidential, personal and private information is often stated as an issue by many CEOs when trying to overcome objections to outsourcing their company’s payroll and human resource administration. I believe many other small business owners are actually using the services of online and self-service payroll providers.

The advent of the World Wide Web has created new competitors who ease the pain of employee and payroll administration for many business executives. Intuit has taken Quicken© and Quickbooks©, their popular small business accounting software into the cloud, making services available to anyone with access to the internet. Most banks and credit unions have formed partnerships that offer payroll services to their business banking customers. Web-based providers like Gusto.com (formerly Zen Payroll), Justworks.com, and Namely.com offer an online suite of payroll, employee benefits, HRIS, and workers compensation.

Words of Advice

Small business owners and executives have never had so many options when deciding the best solution for their company’s payroll and employee administration needs. Entrepreneurs, corporate officers and HR professionals should seek the expertise of an independent employee management professional to provide assistance and guidance when evaluating your particular requirements.