To put things in perspective, the payroll processing system involves more than counting employees’ working hours, writing checks, or making deposits. BPOs that specialize in the payroll process undertake specific tasks—such as calculating payroll taxes and accounting for the correct deductions being made, integrating third-party 401(k) and benefits plans, managing electronic payroll records for both employers and employees, and upholding compliance with all state and federal laws as regards payroll.
Employees typically log their work hours through bandy clocks, punch cards, fingerprint scans, or online accounts signaling the beginning and end of their working day. The payroll services provider is tasked with collecting that information from the company and thus calculating gross wages, withholding and deductions; printing checks; making direct deposits; and arranging for all employment tax filing procedures.
All this complicated information is made easy for payroll providers with the usage of payroll software; your hired personnel will take charge of assessing calculations and withholdings with their chosen software. The calculations can be specific to each employee paycheck as it comes along—a listing of the deduction (for example, for the purpose of 401[k] contribution), the parameter to be met (in percentage, in dollars), and the total amount to be withheld. Often, your payroll providers will also receive automatic updates from the software whenever there are changes to the tax laws of the areas they service.
The accessibility and ease of handling information is extended to the client, with the help of real-time technologies. Instead of making numerous calls to the payroll service just to receive updates about wages and hours, client companies might also have the option to log into the online payroll system, record the hours for the pay period, and the data for the payroll account will be updated immediately, in real-time.
In other words, if you choose to outsource a payroll service for your company, here are some of the basic services you will be paying for:
Preparation of paychecks
Your payroll specialist will handle all the duties in the timely and accurate payment of wages for your employees, namely the calculation of work hours, overtime rates, tax deduction, and the like.
Preparation of financial statements
Your payroll service provider should accompany each service with reports on how this affects your company’s budget and expenses, so that you receive an accurate picture of the company’s financial health.
Crucially, your payroll provider should be on top of all things tax-related, with regard to everything from completing W-2 distribution, assessing annual tax withholdings, and making sure all tax payments are made on time to the relevant authorities.
Skills, technology, and scaling up
One of the best arguments for choosing a payroll provider is the idea that they will help you transition from pen-and-paper accounting to accurate and up-to-date digital channels. If your business looks to expand, hiring an outsourced provider with the skills and technology at hand is a great investment—essentially one for a partnership in scaling up.