How Much Does Payroll Processing Cost?

A common question we get is “How Much Will it Cost?” Great question! The actual amount your organization may have to budget will depend on a number of factors, which we address below. The total cost will ultimately depend on your needs and certain characteristics to how you run your business. The good news is, when you compare costs to the alternative of managing payroll in-house, you’ll find that outsourcing is a cost-effective and preferred way to manage payroll. In a survey conducted by Nelson Hall, 85% of respondents said that cost reduction was their primary business goal for outsourcing. In addition to saving money, you will also have the peace of mind that comes from knowing you are in compliance with all local, state and federal tax regulations and IRS requirements.

Below are some important factors that influence payroll costs:

1. Number of Employees

Size matters when it comes to estimating payroll expenses, and so too do the savings! Pricewaterhouse Cooper reports that outsourced savings increase the more employees you have. Mid-size organizations (those that employ between 100 and 1,000 employees) reduced payroll costs by 9%, but larger organizations with more than one thousand employees cut their expenses by a whopping 27%.

Payroll vendors, including PAYDAY Workforce Solutions, usually estimate payroll processing costs according to the services you’ll need and the number of employees you manage. A payroll provider may offer a flat monthly-based service fee, or a payment schedule that is payroll-based.

2. Pay Frequency

Do you pay employees weekly, bi-weekly, or twice a month? The frequency of your pay periods may also affect the cost of your payroll processing. Usually, higher frequency pay periods require more work to manage, and those costs will have to be factored into your cost estimate. While the number of pay periods is not regulated by the IRS, certain states do have have certain laws with regard to how often an employer pays wages. For example, in California, all wages for the normal work period for non-exempt employees must be paid at least twice each calendar month.

It may even be more beneficial for employers to pay on a weekly basis. For example, weekly payrolls help maintain steady cash flow due to the smaller, more consistent payments to employees and agencies, rather than a larger amount leaving the bank account on a less frequent basis. In addition, weekly payrolls may be required for Certified Jobs or through a collective bargaining agreement.

3. Other Features and Benefits

A basic payroll package includes paycheck processing, tax filing, record-keeping and other related services. But would you benefit from other services, such as HR services, employee benefits, time and attendance management, pay-as-you-go workers’ comp insurance, 401(k), benefits administration or other workforce-related services?

When evaluating payroll processing companies, consider how other features may help you streamline your business and make running your business simpler and more enjoyable. When corresponding with payroll providers, consider how timely and responsive the service representatives are to your needs. Do they take the time to understand your business? Will you have a dedicated  specialist to run your account? Will you get the personalized service you deserve? When it comes to running your business, the cheapest provider may not be your best fit. Consider other factors such as their business history, experience in working with companies such as yours, financial stability, customer testimonials and depth of service offering.

Consider the most important factors to running your business, not just for today, but for 5 or 10 years in the future. Don’t forget to ask the right questions to see if the provider offers the right solutions and is able to work within your budget. For more information, contact an account specialist today. We’d love to help!


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