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How Much Time Should You Spend on Payroll?

Every business, large or small, must meet its payroll obligations to its employees.  Payroll issues are complicated for a modern business.  A payroll department manages so many aspects of your employee compensation, including payroll processing, direct deposits, quarterly and year end tax issues and reporting requirements, time and attendance, management reports, worker’s compensation, 401 (k) and other retirement account reporting issues, unemployment claims, vacation accrual reporting, and more.  For a small business, this list can be overwhelming.  Spending time on these administrative tasks often takes away from valuable time spend building and developing your business.  How much time should you spend on payroll?

To answer this question, a business owner should determine how much time they are really spending on payroll each year, and how much that time is really costing them in dollars, and lost business generation.  While this seems like an easy question to answer, many small business owners do not accurately determine how much time is really being spent on payroll each year.  Payroll time is not just the time it takes to issue checks and resolve small problems.  An employer must also take into account time that is spent other issues such as retirement fund management, employee benefits, tax reporting and filing, worker’s compensation issues, and more.   The National Small Business Association 2013 Small Business Taxation Survey states that 24% of small businesses spend over 120 hours a year dealing with employee federal tax issues alone.  Multiply this by the hours spent on all the other issues, including correcting and paying for payroll mistakes, and you start to get a realistic picture of the time and money your business is spending on payroll.

In addition to the actual costs, is the intangible cost of not being able to spend valuable hours each week developing your business and increasing revenue because you are mired in administrative tasks that can be difficult to manage and expensive should you make a mistake.  While there is no magic number of hours that a business owner is spending that signals the need to outsource to a payroll company, a business owner should be aware of the time spent and decide what is best for his or her small business.  Ask yourself the following questions:

  • Are you spending more time than you want managing your payroll?
  • Are you beginning to hire more employees, and thus changing the scope of what payroll has been in the past?
  • Are you finding that mistakes made in payroll are becoming expensive, including tax penalties for mistakes made with filings to the IRS?
  • Are you unable to spend time managing other important issues in your business, such as new clients or new business opportunities? 

If you are saying yes to these questions, then it is probably time to consider hiring a payroll service professional, like SourceOne Payroll.  The experts at SourceOne have many different services and can tailor a program to meet your specific needs.  Outsourcing this important aspect of your business will likely save you time and money in the long run by allowing you to focus on what is important – growing your business. 

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