Manual Payroll Vs. Outsourced Payroll: What’s Actually Less Expensive?
But the research is clear: Most small business owners hate running their own payroll. It’s a costly, time-intensive process, and innocent errors can snowball into audits and fines with the IRS, DOL, or state agencies.
Let the professionals handle your payroll. You’ll get precious time back every month—and you can spend those hours on tasks that actually grow your business.
Read our full blog to learn more:
Table of Contents
The Problem With Running Manual Payroll
The Problem With Running Manual Payroll
We’ve seen a ton of research around how cumbersome handling payroll internally is for business owners. And although the final data points vary from source to source, the one constant is this:
Managing payroll as a business owner is hard.
Here’s some of the data we’ve uncovered:
- The average small business owner spends ~5 hours on payroll during each pay period, according to Bloomberg Tax. Over the course of a year, some owners spend a total of 21 days focused solely on payroll!
- 49% of owners say running payroll is frustrating.
- 47% say running payroll is complicated.
- 25% of small business owners lose more than 10 hours of productivity to regulatory compliance (including payroll compliance), according to the Kansas City Business Journal.
But the most surprising data points came from the Bloomberg Tax report: 65% of small business owners say they would prefer to outsource payroll.
If you’re among that percentage, we have good news: Outsourcing is a great strategy.
As we’ll explore later, outsourcing payroll is often less expensive than running it yourself. And, just as important, you could reinvest that time in other areas of the business.
According to that same report:
- 38% of employers say outsourcing would allow them to better focus on the business.
- 35% said it would allow them to better prioritize their responsibilities.
- 31% said an outside payroll processor would give them peace of mind.
All told, we’ve identified three major benefits of outsourcing:
- Lower costs.
- Greater focus on the rest of the business.
- Greater confidence in payroll compliance and accuracy.
But don’t take our word for it. Let’s see what the math says.
The Math On Manual Payroll Vs. Outsourced Payroll
If you’re on the fence about outsourcing payroll, here’s what you should know about the expenses—including if you decide to keep the responsibility in-house:
Calculating the Cost of Manual Payroll
To help calculate the cost of running your own payroll, we need to make a few assumptions. For the sake of our math, we’ll say:
Your Annual Salary: $100,000
Total Days Spent Running Payroll Annually: 21*
With those factors in mind, here’s our equation:
$100,000 / 12 months x 21 days / 30 days = $5,833.33 Spent On Running Your Own Payroll
$5833.33 per year averages out to $486.11 per month of your time dedicated to payroll-related tasks.
Remember: This is time you could focus on other areas of your business—on tasks that could actually grow your company, such as:
- Training Employees
- Building Your Sales Pipeline
- Refining Processes
- Focusing On Customer Service
*We’re basing this number on the research we cited earlier in this article.
Understanding the Cost of Outsourced Payroll
In almost all circumstances, outsourced payroll is less expensive even when you choose the upgrades.
While costs vary, your invoice likely depends on a few different variables:
- The Base Fee – Most payroll providers include some sort of monthly base fee. While this fee fluctuates from provider to provider, it’s often somewhere around $50–$100 per month.
- Your Employees – Every employee is an additional fee. You’ll often pay about $5–$15 per employee per month, depending on your provider.
- Your Add-Ons – Additional upgrades (like HR services, employee self-service, and others) can tack on extra costs that contribute to your expenses.
With that in mind, let’s run some additional numbers. Let’s say you have 15 employees. You could make this estimate:
- Base Fee: $75/month
- Employee Fee: $10/employee
- Add-Ons: None
Our math becomes:
$75 Base Fee + (15 Employees x $10 Per Employee) = $225 Per Month
Obviously, $225 is less than our $486.11 per month to run payroll yourself. In fact, it’s less than half! Just as important: In addition to saving money, you’ll also save time that you can reinvest in other areas of the business.
In other words: You’re saving money and investing in other areas of your business!
Outsource Your Payroll to The Payroll Shoppe
If you’re ready to outsource your payroll, contact us. Our specialists are prepared to streamline your payroll and give you the freedom and flexibility to focus on your business growth instead of dedicating hours and hours every month to payroll.