The 5 Big Lies of In-house Payroll

You have 3 employees lined up to see you, a looming deadline, and payroll is tomorrow…

Sound familiar?

Today business owners and managers wear multiple hats.  Days are filled with deadlines and meetings… and well, more meetings.

And while this can be stressful, the truth is… you can outsource a lot of your work.

Tim Ferris talks about outsourcing everything in his new cult classic “The 4 Hour Work Week”.  But before you get too excited, it’s really about outsourcing the things that you aren’t great at. The things that someone else could do better.  And the ‘4 hour work week’ refers to only spending 4 hours on “work” because the rest is what you should be doing and want to be doing.

Which brings me to payroll…  Unless you love spreadsheets, worship time consuming tasks, and want to babysit time cards, hours, and checks… you need to be outsourcing your payroll.

Oh, but you’ve heard otherwise.  Well, The Payroll Gal begs to differ.  That’s why I’ve covered the 5 big lies of in-house payroll. Here we go…

1) Handling payroll in-house is cost effective and error-free.

Actually, it’s not.  Most of the payroll errors are made prior to calculating the first set of checks.  You need to understand the new overtime laws or other labor laws in your state to ensure you are collecting & reporting hours correctly.    Did you set up the calculations for the pre-tax/post-tax deductions and earnings properly?  Are you familiar with the governments determining factors on how to classify your employees vs. 1099’s? Bottom line:  Each decision has a tax consequence.  One little mistake now will create one big clean up later.

2) I’m going to lose control.

Lose Control? Uh, how about take control. Your payroll vendor is your partner.  They are the experts at payroll; it’s what they do 24-7-365.  They have tax and labor law updates uploaded in their systems before you even realize they exist.  Of course you still have to report and approve the payroll, BUT you do not have the responsibility of making the tax deposits or remitting returns to the government.  The responsibility is theirs… as your partner.  Their mistake = their problem. And they will fix it if anything goes wrong.

3) My business is too small; plus, I can’t afford it.

This one is my favorites because it’s ripe with fault. It doesn’t matter if you have one or 100 employees.  The rules are all the same.  You must comply with the ever changing tax laws and timing requirements for how payroll tax is calculated and paid.  What about the various state & federal mandates?  Does your in-house system comply with new hire requirements and E-Verify?  Sadly, ignorance is not an excuse to the government.  As a small business don’t try to run your business and a payroll business. Outsource it.

And you can’t afford it? Consider this: one mistake could cost you thousands in interest and penalties.  Sure you can write letters and try to abate the tax situation.  But that will take hours of your time with no guarantees.  Or you can ask your CPA, who will charge you an hourly rate to review, fix and amend the returns.  Save yourself the hassle and just do it right from the beginning.  You can’t afford not to hire it out.

4) Switching is a hassle.

While change is tough, getting out of needless work isn’t. Transitioning to a new provider should be a lot easier than you anticipate.  If it isn’t, you didn’t pick the right provider.  Reputable vendors will provide you with a checklist of items needed for a smooth transition. Ask for it in the sales process. They will do all the heavy lifting behind the scenes and will provide a payroll audit on your current year.  Identifying discrepancies prior to running your first payroll will ensure perfect W-2’s at year end and could potentially keep you out of hot water with a government agency.  Switching shouldn’t be a hassle, it should be professional and organized.

5) January 1st is the only time to switch.

Christmas comes only once per year, but changing your payroll doesn’t have to wait.  It’s true that it is easier in January, but it isn’t mandatory.  Payroll companies are designed to help clients all day every day.  As a matter of fact, if you do it in the middle of the quarter, the payroll company will pick up all the open liability and pay it on your behalf.  They will also prepare and file all the quarterlies for you.  Just one less thing for you to do. If you’re unhappy doing payroll in-house or unhappy with your current provider, switch.  There are benefits to doing it.  And life’s too short to be stuck in a bad payroll situation.  It is why we all go to work every day.


So there you have it… the 5 Big Lies of In-House Payroll.  I think the biggest lie is the 6th: Telling yourself you are better and more efficient at payroll than a payroll company that spends every waking moment servicing and perfecting payroll for thousands of companies.

Truth is, outsourcing your payroll is smart.  While you got into business to make money, I’m sure you didn’t get into business to run a payroll.  Payroll outsourcing is just one way to ensure your company is compliant without the stress and responsibility of dealing with all the rules and regulations.  Choosing your vendor wisely is the key to a perfect transition.

If you need honest, expert advice on payroll, HR, or benefits… without a sales pitch… just reach out.  That’s what I do.  I started The Payroll Gal to help you make smart educated decisions and to get the best deal.

I can be reached at