Can payroll outsourcing work for you? Save time and resources with a payroll partner.[ILLUSTRATION OMITTED]
It's no secret that franchise owners and operators have to wear multiple hats. For example, you are likely the face of the brand to your customers and community, but you probably also handle many back-office functions and are responsible for monitoring the accuracy of payroll and maintaining tax compliance--functions that are time consuming and burdensome to any business.
According to ADP research, 68 percent of small businesses still prepare payroll in-house, while 32 percent outsource. Spending time away from core business to work on back-office functions such as payroll can adversely impact your franchise's income. So the question becomes: How can franchise owners and operators ensure that important operational functions like payroll are effectively managed while focusing on the core business functions that drive revenue?
Is Outsourcing Right for Me?
While the initial thought might be to keep this function in-house, franchise owners have to assess whether doing payroll on their own is worth the risk. According to ADP, one in three small businesses receives a tax penalty costing more than $800 per year. If franchise owners find themselves in that situation, outsourcing payroll processing might be the answer for them.
The challenges facing all business owners are to manage labor and administrative costs and to alleviate the risk of being out of compliance with employment regulations. Franchise owners often make the mistake of assuming these issues only affect large multi-national business. However, a U.S. Small Business Administration study, The Impact of Regulatory Costs on Small Firms, showed that America's small businesses are often the hardest hit financially. The study found businesses with fewer than 20 employees faced a 45 percent greater federal regulatory burden than their larger business counterparts. Small businesses annually spend $1,304 on tax compliance per employee, 67 percent more per employee than larger companies with 500 employees or more. Fortunately, franchise owners and operators do not have to go it alone. Today, there are a variety of products and solutions available to help them manage payroll in a cost-effective and simple way.
Choosing the Right Outsourcing Solution
Finding the right payroll, tax filing and human resource management solution can save thousands of dollars per year. The first step is for franchise owners to evaluate their goals and needs and ask themselves some basic questions. How much is my time worth? How much time am I willing to dedicate to payroll? Do I want to lessen the burden of payroll administration? Do I need to improve my accuracy and compliance ?
ADP Research has found that companies with 20 employees or more spend upwards of half-a-day per pay period on payroll functions. On a weekly payroll schedule, that averages out to two full days a month dedicated to payroll. If the decision to outsource payroll processing is made, keep the following criteria in mind when evaluating an outsourcing partner: the solutions should always provide the ability to calculate gross wages and deductions; the provider should have a proven track record in the industry and national reputation; the solution should also allow business owners the ability to access the information anytime, anywhere; the solution should also integrate with additional value-added services like time and attendance or a pay-by-pay premium payment program for workers' compensation or job tax credits.
An outsourcing partner can help franchise business owners with payroll and human resource-related operations, aiding the business to develop a streamlined and automated workflow process. This partner also will help maintain tax compliance without costing an owner precious hours. Keeping current with all the changing tax codes and laws is time consuming and one misstep can be very costly. Having a tax and compliance solution can help assure business owners that their operations comply with regulatory and tax codes, easing the burden on their staffs.
Making Payroll Outsourcing Work for You
Ultimately, payroll is a task that every business needs to execute. It's important that each individual business selects a payroll solution that best meets its needs. Evaluate the options, determine what is most important to the organization and ask for references. Success in this sense is based on the expertise and reliability of the outsourcing partner--it's essential that both parties' goals and values are aligned.
Sources of Information
* ADP Small Business Services (SBS) Administrative Study, 2007
* ADP Small Business Services (SBS). (January 2009). "Why Outsource." March 2, 2009 from the SBS Web site: http://smallbusiness.adp.com/ outsource/index.asp.
* "The Impact of Regulatory Costs on Small Firms, "By W. Mark Crain, Lafayette College, Prepared for the SBA Office of Advocacy, September 2005
* ADP Small Business Services (SBS) Administrative Study, June 2003
Deepak Mehta is the vice president, strategic business alliances, for ADP Small Business Services. He can be reached at 866-684-7456. ADP is founding sponsor of IFA's 2009 Public Affairs Conference.