Companies try to reduce the cost of operations as much as is practically possible. One way is by outsourcing some of the company’s processes. By engaging a business process outsourcing company, companies can not only reduce their costs, but will also improve the quality of services delivery and free up financial and non-financial resources to other aspects of the business. These advantages have seen businesses hiring business process outsourcing companies to handle the payroll.

But what does a business stand to gain by outsourcing its payroll? First, using a business process outsourcing company reduces the pressure and the risks that come from late payroll filings to the taxman. With someone else handling your payroll who is an expert in payroll processing, US companies can avoid the hefty penalties from the IRS for late or incomplete payroll filings. It is a well-documented fact that the IRS has penalized almost half of all businesses in the US due to incorrect or late payroll filings. Do not let your company be another negative statistic.

Outsourcing your payroll allows only expert and trained payroll personnel to handle and manage it. The IRS also penalizes US companies that are unable to keep up with and apply the tax laws, codes and procedures that accompany payroll management. The outsourced payroll service provider usually has tax experts on board or retainer that provide input on latest legislation around payroll processing and remuneration.

Engaging a business process outsourcing company also allows a business to more efficiently utilize payroll information. The outsourcing services provider will usually have programs that can make it that much easier to not only process but also protect electronic payroll data. Many payroll processors use advanced applications with multiple functions including the ability to process and complete an employee’s W-2 form electronically. If there are problems with the information, corrections are easy to carry out and can be quickly applied before the next payment cycle. Payroll software is far better than a manual payroll processing procedure.

Your business can dictate the terms of service to the business process outsourcing company and develop a service level agreement that the outsourcing company must commit to as condition for the continued business relationship. If you are unsatisfied with the service offered by the outsourced company, you should have an exit clause that allows you to move the payroll process to a more capable company.

Daven Michaels Author of the book Outsource This!