According to a recent report by Raleigh, NC-based procurement intelligence firm Beroe, Inc., the global market for payroll outsourcing will rise to upward of $22 billion next year – up from $16.4 billion in 2015. If you’re starting or building a payroll service bureau, a share of that growing opportunity can be yours if you understand just how outsourcing payroll and related HCM services benefit employers of all sizes and industries. A key to understanding that is knowing just how employers that opt for handling payroll inhouse stand to lose – and lose big.
According to a number of studies and payroll states, every year the IRS penalizes small businesses billions of dollars for payroll errors. In 2017 alone, more than 5 million employers nationwide were assessed over $7 billion in civil penalties. As a result, 82 million – 54 percent of the North American workforce – are affected by payroll problems. That’s critical considering that nearly half of workers say they’d launch a new job search after just two negative issues with their paycheck.
Among the most common and costly mistakes made by employers who DIY their payroll:
- Misclassifying employees: Misclassified employees, primarily those erroneously treated as independent contractors, often miss out on the benefits and protections they’re entitled to by law. A top result is that employers fail to withhold and pay necessary taxes. This leaves a business subject to paying both its own share and the employee’s share of taxes plus penalties, interest and back wages, as well as vulnerable to litigation.
- Failing to keep accurate payroll records: Federal and state laws, as well as industry-specific standards, mandate that employers store certain information for specified amounts of time. Failure to do so can bring on a range of troubles from tax audits and penalties to criminal charges in the most severe cases.
- Missing tax payments and filing deadlines: Most employers withhold the correct amount of state and federal taxes, they’re also required to report and pay them by certain deadlines throughout the year. Many entrepreneurs with new or smaller businesses are unaware of the full requirements and deadlines, or that late payments can result in costly penalties.
These common mistakes and the potentially devastating consequences bear out plenty of reason for employers (particularly small and medium-sized businesses) in your payroll service bureau’s target market to outsource. Payroll mistakes occur twice as often when employers attempt to tackle it inhouse compared to third-party solutions – 11.4 percent vs. 6.1 percent, respectively. Not only do error rates improve with outsourcing payroll, but statistics show it can save companies an average 18 percent. Further, 30 percent of organizations responding to a recent survey said they would strongly consider switching to a new provider for a better user experience.
That’s where Apex HCM can help. We offer a full suite of highly customizable, cloud-based payroll, HR and time and attendance technology solutions designed to streamline, maximize and vastly improve the user experience for employer clients and their employees. Call 877-750-2739 or contact Apex HCM online to learn how.