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When Your Organization Can Benefit from a Payrolling Company

Posted on April 3rd, 2019 Read time: 3 minutes

Payrolling Company Benefits

When looking for help with human resources tasks for contingent workers, businesses don’t always know what a payrolling company (also known as an employer of record) can do for them. It can be confused with payroll processing, but an employer of record can help in many more ways. And it’s especially useful for expanding businesses or those needing temporary help.

An employer of record can save companies time and money. Companies that handle HR tasks in-house for contingent workers can spend up to 18 percent more than the ones that outsource these tasks, according to the PwC study “The Hidden Reality of Payroll and HR Administration Costs.” For companies that work with direct-sourced temporary, seasonal, or project-based workers, a payrolling partner can provide key savings.

Liabilities related to both the employee and the employer are part of the payrolling company’s responsibilities. A client of the payrolling company doesn’t have to worry about payroll and employer taxes like FICA, FUTA, SUTA, and even workers’ compensation.

Think about all the details a business must keep in mind. Benefits for its contingent workforce, such as flexible spending accounts, 401(k) plans, general liability insurance, and health insurance could all be maintained by a payrolling company. Payrolling companies also ensure compliance with local, state, and federal employment laws and mandates. For companies with contingent workers across multiple states, this can be a huge time savings. Innovative Employee Solutions (IES) saves clients about 80 hours per week in reviewing compliance laws and regulations across every jurisdiction.

But beyond working with contingent employees, why would a company ever need a payrolling provider?

Hiring a payrolling company

Because one in three small businesses spend more than 40 hours each year on federal taxes — and 63 percent spend over $1,000 on administrating those taxes — partnering with a payrolling company could sound like a dream come true.

So how do businesses determine whether they should hire a payrolling company? Here are a few examples of businesses that could benefit:

1. Businesses that are expanding to another state but aren’t licensed there yet

A payrolling company can help by hiring and paying employees in the new location. The employer of record can work with a company indefinitely or for just a couple of months until it’s fully licensed in that state.

2. Businesses that have a temporary project that requires hiring a lot of workers

The employees will only be needed temporarily, and a company can experience a considerable increase in its state unemployment tax (SUTA) rate when the assignment ends and the workers are let go. An employer of record can protect the company’s SUTA rate, as the unemployment claims will be handled under the payrolling company.

3. Staffing companies that need back-office support for contract placements

Hiring a payrolling provider to handle onboarding, payroll funding and administration, benefits, etc., saves significant time for a staffing company, allowing the business to focus on what it does best: finding top talent for clients.

4. Small businesses that need additional staff

Unfortunately, many small businesses don’t have the time or knowledge to work on the administrative functions of processing paperwork and setting up payroll. An employer of record can handle processing employees’ salaries, benefits, and much more.

Based on these examples, do you have a better idea of your company’s payrolling needs?

How one company benefited

IES recently worked with a leading technology company that had more than 80 international locations. The organization needed to find a service provider that could assist with payroll and HR administrative services for its contingent workforce in cities nationwide.

IES worked with the company to implement a custom HR and payrolling system that saved time and money by assuming responsibility for payroll and employment taxes. IES also covered the necessary insurances, such as liability, unemployment, and workers’ compensation.

As a result, the company saved 25 percent on workers’ compensation insurance for more than 45 employees, and it now spends 20 percent less time on administrative tasks associated with employee management.

There are many benefits of partnering with a payrolling company. And if businesses find that they could use these services, it’s time to find a provider. For more information on what IES can do for your business, please contact us. We are ready to design a solution for you.

Written by: Sara Jensen, Vice President of Business Development at IES

Sara Jensen is the vice president of business development at Innovative Employee Solutions (IES), a leading global Employer of Record in more than 150 countries that specializes in contingent workforce solutions such as outsourced payrolling, independent contractor compliance, and contractor management services. Founded in 1974, IES has grown into one of San Diego’s largest women-owned businesses and has been named one of the city’s “Best Places to Work” for 10 years in a row.

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