Startups face hundreds of challenges, everything from product development to marketing to sales. Keeping employees confident and motivated in a new venture is critical to success, and anything affecting their pay can undermine employees attention to the mission. One function that can be easily delegated to a third party is payroll. With a payroll service, both staff and management are free of weekly or bi-monthly stress and distraction.

Payroll services are not just a good idea for startups. Almost 25% of companies use a payroll preparation service and that percentage is expected to increase according to industry analyst firm IDC. The reasons both large and small companies use payroll services are compelling.

No Payroll Software to Buy and Maintain
When companies make the decision to outsource payroll, one of the most immediate cost offsets is that there is no software to purchase, install, maintain, support and upgrade. And that means a cost savings in IT labor too.

At the same time, many payroll service companies offer integration into back office accounting systems and may even provide some customization. Additionally, payroll services continually upgrade their offerings to stay competitive, a benefit that subscribers do not pay for directly.

Bigger Payroll Doesnt Mean Bigger Resources
With payroll services outsourced, as companies grow, they do need to add additional staff to support payroll. Likewise, should business contract, client companies do not need to worry about reassigning tasks, layoffs, or unemployment insurance.

Payroll Services Allow Companies to Focus on Core Business
When companies use a payroll preparation service, they gain back the time they would otherwise spend on this activity, estimated to be approximately eight to ten hours per pay period. This time can be used instead to promote the mission of the business.

Delegate Payroll Preparation Responsibility to Employees
With the implementation of software as a service (SaaS), companies are able to delegate to the employees themselves the gathering and submission of hours worked. Employees log in to the payroll service company Web site and complete electronic timecards. The manager is then notified that the completed cards are ready for electronic review. After reviewing them, the manager can approve or send back to the employee any card that is not accurate. There are defaults for submission, approval, and correction, so employees need not worry that they will not be paid if their manager is not available to approve their hours.

Most service providers can also accommodate variable pay such as commissions and bonuses.

Offer Paper Paychecks or Direct Deposit
Clients of payroll services can choose to have paper checks cut and delivered for distribution or provide direct deposit. Either way, the service calculates the periodic and annual federal and state withholdings as well as contributions to health and retirement plans.

Eliminate Payroll Headaches like Regulatory Compliance
Perhaps the biggest benefit to companies that choose to outsource payroll is that that the payroll preparation service is obligated to keep abreast of and comply with all mandated regulations. Although ignorance of legislation does not relieve client companies from compliance, the burden of penalties, if any, shifts to the payroll services.

Source
HRWorld.com