The True Cost of Payroll Services
The True Cost of Payroll Services

The True Cost of Payroll Services

Whether you’re Google or a start-up operating out of your parent’s garage, you’re required to process payroll, calculate taxes and maintain records in a reliable way. How do most medium and small businesses process payroll? Well, typically there are 3 options for running payroll:

  1. Hire a professional employer organization (PEO)
  2. Manage payroll, yourself
  3. Partner with an HR & payroll provider

Deciding which option is best for your organization can be overwhelming, especially if you’re looking to cut costs and mitigate risk.

“Isn’t Payroll Easy? It’s Just Adding Numbers and Writing Checks, Right?”

WRONG. Processing and running payroll is a composition of challenging, high-stakes tasks. In fact, payroll teams have multiple responsibilities, including:

  • Processing payroll
  • Filing tax and voluntary deduction reports
  • Processing levies and garnishments
  • Computing wage and overtime payments
  • Calculating state, federal and employment taxes
  • Maintaining compliance
  • Entering new hires into the payroll system
  • Recording and calculating payroll deductions
  • Processing requests for paycheck advances

Doesn’t sound like sunshine and rainbows, does it? Managing payroll can be a serious burden, especially when you’d rather be focused on more strategic initiatives like recruiting, benefits and people management.

So, which option is best for you and your organization? Let’s do the math.

analyzing cost of payroll

  1. Hiring a PEO
  2. Working with a PEO can be a great option if you want to be completely hands-off payroll. But there are some concerns you should address. For one, this is the most expensive option available to you. Also, when working with a PEO they become your co-employer and typically require you to sign a long-term contract.

    How much is it going to cost? Well… like all questions about price, it can vary.

    PEOs are typically paid by charging you a percentage of your total payroll, usually ranging between 2% and 10%. What does this mean for you? Here’s an example: Let’s say you employ 20 people and you pay each of them an annual salary of $35,000. If a PEO charges you the industry average of 6% of your gross payroll, you will receive an annual bill of $42,000. The larger your organization grows, the more you pay.

  3. Managing Payroll, Yourself
  4. Many small and medium-sized businesses think manual, inhouse payroll is a cost saver. IT’S NOT. In addition to the time burden of manual payroll, there are associated costs and risks that most businesses don’t consider. Hard to believe? Well, according to the IRS, 40% of medium and small-sized businesses are fined for failing to deposit withholdings, miscalculating taxes or submitting incorrect filings. Unfortunately, penalties and fines can be a death sentence for smaller organizations.

    Other costs include:

    Estimated costs for 20 employees

    • Direct deposit & setup fees – $50 to $150
    • Transaction fees - $31.50 per pay period
    • Paper checks & printer fees - $60 per pay period

    If you’re reading this article, chances are you currently manage payroll yourself and you’ve realized the time burden, associated costs and high risks aren’t the right option for you and your organization.

  5. Partnering with an HR & Payroll Provider
  6. When you partner with an HR & payroll software provider you’ll notice immediate benefits. From streamlining your payroll processes and calculating taxes accurately to maintaining records and free access to a dedicated team of payroll experts, it’s the perfect balance between completely outsourcing payroll to a PEO and managing payroll yourself.

    I know what you’re thinking… “Just tell me how much it’s going to cost!”.

    Fine. Here we go: An HR & payroll provider usually charges a fee per employee per pay period. But these fees are minuscule compared to a PEO, cents on the dollar. With an HR & payroll provider, you can expect to pay up to 40 times less than a PEO. That’s a small price to pay for accurate and streamlined payroll, ensured compliance and peace of mind.

    Unlike PEOs, there’s no long-term commitment. And, the larger your organization grows the less you pay per employee.

    Paycor’s Perfected Payroll

    We’ve spent nearly 30 years perfecting online payroll. Our solution is the easiest and most powerful solution for small to medium-sized businesses on the market.

    • Our dedicated tax experts assist you with payroll tax compliance, workers’ comp and federal and state laws and regulations
    • Paycor eliminates administrative processes by empowering employees though self-service access
    • Maintain accurate employee pay records
    • Improve your payroll service with general ledger integration and helpful HR resources like employee policies, job descriptions and custom templates

More to Discover

Webinar: COVID-19 Command Center:  Instant Insights and Tools for Crisis Management

Webinar: COVID-19 Command Center: Instant Insights and Tools for Crisis Management

As part of Paycor’s commitment to keeping our customers informed and compliant during the COVID-19 crisis, we’re excited to announce the release of Paycor’s COVID-19 Command Center, an analytics and HR solution that delivers the instant insights and tools you need to make business-critical decisions. We will walk you through Paycor’s COVID-19 Command Center and demo the features and functionality and so you HR Leaders can make better decsions using real time data that you can manipulate and customize according to the needs of your business.Speakers: Kelly Silverman and Nabeel Sattar

Coronavirus: Unemployment Rates By State

Coronavirus: Unemployment Rates By State

Historic Unemployment Claims As more COVID-19 regulations are passed and businesses temporarily close their doors, the U.S. is seeing historic weekly unemployment benefit claims across all 50 states. In fact, the previous two weeks have seen nearly 9 million unemployment claims. According to the U.S. Bureau of Labor Statistics, roughly 5.6% of the U.S. civilian labor force has applied for unemployment benefits—as of March 28—which is higher than the peak unemployment of the Great Recession at 4.8%. Unemployment Rates By State State Unemployment Claims (Ending 3/28/20) State Unemployment Rate* Alabama 80,186 4.2% Alaska 14,523 7.5% Arizona 89,064 3.1% Arkansas 26,944 3.1% California 878,727 6.5% Colorado 60,784 2.6% Connecticut 33,182...

Paycor's COVID-19 Command Center

Paycor's COVID-19 Command Center

We're excited to announce the release of Paycor's COVID-19 Command Center, a new analytics solution that delivers instant insights for crisis management. With the COVID-19 Command Center, you'll be able to: Prepare with real time insights Plan with actionable data Respond with the help of HR experts Recover quickly by playing the long game now Discover how your organization can make the best possible decisions with real time data, actionable insights and expert HR counsel.

Webinar: COVID-19 Summit - Why Leaders Need Technology More than Ever - 4/23/20 @12pm ET

Webinar: COVID-19 Summit - Why Leaders Need Technology More than Ever - 4/23/20 @12pm ET

The HCM industry has reached a fundamental crossroads. Now more than ever, leaders need HCM technology to help them see around corners. They also need to harness the power of their people for growth, but they lack the right tools. Join Paycor’s Chief Product Officer, Ryan Bergstrom, to get an insightful deep dive into the evolution of HCM technology and why the moment where in right now is such a critical time for SMB leaders. Speaker: Ryan Bergstrom Ryan is the Chief Product Officer for Payor and is responsible for setting the strategy for Paycor’s HCM suite to meet SMB market needs. Ryan spent 7 years at Ultimate Software, where he served as VP of Product Management. Prior to Ultimate Software, Bergstrom held manager and director...