Business owners who place a high value on their time and peace of mind often end up outsourcing payroll. By partnering with a full-service provider, most of their payroll responsibilities – wage calculations, tax withholdings and deposits, reporting, etc. – are taken care of for them.

Top reasons to outsource payroll

Employers who don’t have the administrative resources or the expertise to run payroll on their own may want to seek professional assistance from a third party. Other reasons for outsourcing payroll are that it helps:

  • Save time

    When employers take payroll off their plate, they often have more time to focus on other initiatives important to growing their business, such as product development, customer service and sales.
  • Minimize payroll errors

    Payroll providers automate many of the labor-intensive aspects of payroll, thereby reducing the mistakes that commonly result from manual calculations and data entry.
  • Improve security

    Outsourcing payroll to a reputable provider that invests in state-of-the-art technology and has redundant backup and multiple server locations can help employers safeguard their confidential data.
  • Maintain compliance

    Payroll providers stay on top of changing government regulations so employers don’t have to and will often take the lead in filing all paperwork necessary for compliance.
  • Integrate data

    When payroll is fully integrated with time and attendance, benefits and other HR applications, it improves data accuracy and makes it easier to access information through single sign-on
  • Facilitate employee self-service

    Full-service payroll typically allows employees to view their pay information, log their hours and manage their withholdings – all from a mobile device.
  • Reduce costs

    Payroll providers charge fees, but when compared to the cost of the fines and penalties that can result from mistakes, outsourcing payroll may actually save businesses money.

What features do payroll outsourcing providers offer?

Payroll outsourcing providers that have the knowledge and technology necessary to produce accurate, timely results generally offer these key features:

  • Payroll processing that integrates with an accounting system, if needed
  • Payroll tax filing
  • Employee self-service anytime, anywhere, from any device
  • Employee pay options, including direct deposit and paycards
  • Year-end processing, including Form W-2, Wage and Tax Statement
  • Wage garnishment processing
  • Payroll and custom reporting
  • Employee recordkeeping
  • New hire reporting
  • Accessible client support

How to choose a provider for outsourcing payroll

Knowing what to look for in a full-service payroll provider can help smooth the transition, minimize disruptions for employees and preserve peace of mind. When assessing potential partners, employers generally follow these steps to ensure that outsourcing payroll is a success:

  1. Determine requirements
    Multiple pay frequencies and employee classifications can make payroll complicated.
  2. Address compliance
    Adhering to multi-state and multi-national jurisdictions adds another layer of complexity for payroll providers.
  3. Evaluate vendor history
    Reputable providers tend to have stable ownership, strong finances and a track record of successful implementations.
  4. Look at peer reviews
    Industry analysts and clients who have used the provider’s payroll services can provide outside perspective and help validate decisions.
  5. Secure stakeholder buy-in
    Outsourcing payroll is often easier with the full support of employees and senior leadership.

Why outsource your payroll to ADP?

Employers who outsource their payroll to ADP get some of the most comprehensive services on the market and the assurance that their business is protected. In fact, nearly 2/3 customers feel ADP helps their company better comply with payroll taxes and regulations than their previous provider.1

Here’s what employers can expect with our payroll outsourcing services:

  • Quick and error-free payroll processing
  • Taxes calculated, deducted and paid automatically
  • Quarterly and annual reporting
  • Unemployment insurance claims administration
  • Mobile-friendly self-service apps
  • Integrated time tracking capabilities
  • Compliance monitoring across all 50 states

Learn more about ADP’s payroll packages for businesses of all sizes

Frequently asked questions about payroll outsourcing

How does payroll outsourcing work?

When a business delegates a portion or all of its payroll operations to a third party, it’s known as payroll outsourcing. In addition to running payroll, full-service providers typically help with tax reporting, regulatory compliance, data security and unemployment claims.

Is payroll outsourcing a good idea?

There are pros and cons to every business decision and payroll outsourcing is no different. Before partnering with a full-service payroll provider, employers should make sure the vendor is capable of meeting all of their requirements and has a reliable track record.

Why should you outsource your payroll?

Employers might consider outsourcing payroll to a full-service provider if they:

What are the benefits of payroll outsourcing services?

Outsourcing payroll may help employers save both time and money. Not having to spend long hours on administrative work affords employers the ability to focus on business growth initiatives, and improved accuracy can prevent costly penalties. In addition, full-service payroll providers that offer flexible pay options and self-service apps can help improve employee satisfaction.

How much does it cost to outsource payroll?

Payroll outsourcing costs generally depend on payroll frequency, total number of employees and the specific services that are being outsourced. In most cases, there is a per-payroll processing fee and an annual base fee. ADP works with employers to determine the right payroll setup for their business, whether it’s a start-up company or an international enterprise.

This guide is intended to be used as a starting point in analyzing an employer’s payroll obligations and is not a comprehensive resource of requirements. It offers practical information concerning the subject matter and is provided with the understanding that ADP is not rendering legal or tax advice or other professional services.

1Internal survey of 752 RUN Powered by ADP customers in 2020.

ADP Editorial Team

ADP Editorial Team The ADP editorial team is comprised of human resource professionals with extensive experience solving complex HR challenges for businesses of all sizes.