Even the most meticulous and experienced professionals find that payroll can be a headache. Slap on a stiff penalty for a tax filing omission, and now we’re talking a full-blown financially-induced migraine.

For many businesses, payroll services offer an attractive and valuable alternative to in-house processing. Chosen correctly, they provide a less expensive, simpler means of paying your employeehomepage_images, filing your taxes, and performing a host of other duties these companies’ sales reps can’t wait to tell you about.

However, choosing poorly is like starting a new job you weren’t right for in the first place — it’s a hassle to leave, but if you stay, you’ll be perpetually frustrated.

Companies often initially process payroll themselves for any number of the following reasons:

  • they consider in-house processing to be more cost-effective than outsourcing
  • they are protective of wage information
  • they want to maintain control over payroll data to handle last-minute changes.

In truth, smaller firms with a stable, salaried staff and minimal changes in tax obligations may well be better off processing internally; it can certainly be more convenient and efficient if your needs are straightforward. But many ultimately discover it’s not all that cheap — especially when you factor in the time spent managing the process.

Plus, without the proper knowledge of payroll procedure and access to a sound payroll program, it’s easy to make mistakes. Employees as well as federal, state, and local tax collection agencies need to be paid in full, on time, and in the proper manner. Usually, late payments are cause for monetary penalties.

Finally, using a payroll service can ease your mind. The Internal Revenue Service has reported that one out of every three employers has been charged for a payroll mistake, with total penalties reaching into the billions of dollars. And given the ever-changing nature of tax regulations, it’s easy to make an error that can grossly affect your bottom line.

This post has been adapted from an article written on Entreprenuer.com. You can read the full article here. Please feel free to tell us your thoughts on outsourcing payroll in the comments below!