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Outsourcing Payroll Services: What a Provider Owns, What Stays With You, and What It Costs
Most companies that say they outsourced payroll did not outsource payroll. They bought payroll software and kept doing payroll. The hours still get entered by someone on staff. The register still gets reviewed by someone on staff. The tax notice still lands on someone's desk. What changed was the invoice, not the workload. Outsourcing payroll services means transferring the operating work, not the license.
What Outsourcing Payroll Services Actually Includes
The term covers a wide range in practice, so the useful question is which specific tasks leave your building. Below is the division of labor under BEG managed payroll, and it is worth comparing line by line against whatever quote is sitting on your desk.
| Task | Payroll Software | Managed Payroll |
|---|---|---|
| Enter hours, PTO, and pay changes | You | BEG |
| Review the preliminary register | You | BEG, you approve |
| Submit the payroll run | You | BEG |
| Federal and state deposits | Software, if enabled | BEG |
| Quarterly 941 and state filings | Software, if enabled | BEG |
| Respond to IRS and state tax notices | You | BEG |
| New hire onboarding and state new hire reporting | You | BEG |
| Garnishments, levies, and child support orders | You | BEG |
| Multi-state withholding setup | You | BEG |
| Year end W-2 and 1099 production | You initiate | BEG |
| General ledger mapping and reconciliation support | You | BEG |
| Employer tax registration in a new state | You | You |
Note the last row. Registering as an employer in a new state is an act only the legal entity can perform, and no provider can do it for you. Any vendor that claims otherwise is either misinformed or describing a co-employment arrangement, which is a different product with different consequences.
The Liability That Does Not Transfer
This is the single most misunderstood point in the category. When you outsource payroll, the employer remains liable for the deposits and returns. The IRS is explicit about it in its guidance on outsourcing payroll and third party payers: employers who use a third party payer are still responsible for the timely filing of returns and payment of taxes, even when the third party fails to do so.
Practically, that means three things. Keep the address of record on your tax accounts as your own address, not the provider's, so notices reach you directly. Enroll in the IRS Electronic Federal Tax Payment System under your own credentials so you can verify deposits yourself. And ask any provider to hand you filing confirmations each quarter without you having to request them.
A provider who is doing the work has no reason to hide the receipts. The point of the arrangement is not blind trust. It is that you get the outcome without doing the labor, while retaining the ability to check.
What It Costs Against the In-House Alternative
BEG manages payroll at $25 per employee per month inside your existing platform, or $45 per employee per month on BEG's isolved platform, all inclusive. There are no per-run fees, no year end surcharges, and no charge for handling a tax notice. The comparison that matters is not against a software subscription. It is against the fully loaded cost of the person who currently does this work.
| Headcount | BEG at $25 PEPM (annual) | BEG at $45 PEPM (annual) | In-house administrator |
|---|---|---|---|
| 25 employees | $7,500 | $13,500 | $60,000 to $100,000 plus benefits |
| 50 employees | $15,000 | $27,000 | $60,000 to $100,000 plus benefits |
| 100 employees | $30,000 | $54,000 | $60,000 to $100,000 plus benefits |
The in-house column also carries a coverage problem that the table cannot show. One administrator means one point of failure. When that person is on leave, payroll still runs on the fifteenth. A service does not take vacation.
How to Evaluate a Payroll Outsourcing Provider
Six questions separate a managed service from a software license with a support line attached.
- Who enters the data? If the answer is your staff, you bought software.
- Who answers a state tax notice? If the answer is a support ticket queue, the work is still yours.
- Do I have to migrate platforms? If yes, ask why the provider cannot operate the system you already pay for.
- What is the all-in monthly number at my headcount? Get per-run fees, year end fees, and off-cycle fees named explicitly.
- How fast is the first live payroll? Days if you stay put. Weeks or a quarter if you convert.
- Will you show me filing confirmations without being asked? The answer reveals the operating culture.
When Outsourcing Is the Wrong Call
Below roughly ten employees on a single-state, salary-only payroll, software plus two hours a month of an owner's time is usually the cheaper answer, and the compliance surface is small enough to manage. The math changes when any of the following appear: a second state, hourly employees with overtime, tipped or commissioned pay, garnishments, or a headcount past twenty-five. Those are the conditions where the hidden hours compound and the first mistake gets expensive. Read the BEG payroll library for the specific mechanics by industry, or see how BEG managed payroll operates inside the system you already run.
Outsource the Work, Not the Platform
BEG runs payroll inside your existing system at $25 per employee per month, or on BEG's isolved platform at $45. All inclusive, live in 3 to 5 business days, nationwide.
Frequently Asked Questions
What is the difference between payroll software and outsourcing payroll services?
Payroll software is a tool you operate. Outsourcing payroll services means someone else operates the tool for you. With software, your staff still enters hours, reviews the register, approves the run, reconciles the general ledger entry, responds to tax notices, and files the year-end forms. With a managed service, a payroll specialist does all of that and you approve the result. The distinction matters at pricing time: software quotes look cheaper because the labor cost sits inside your own payroll, invisible on the invoice.
Who is legally responsible for payroll taxes if I outsource payroll?
The employer remains legally responsible. The IRS states plainly that an employer who uses a third party payroll service provider is still liable for deposits and filings, and that the employer, not the provider, is ultimately responsible for any taxes due. This is why we recommend keeping the IRS Electronic Federal Tax Payment System enrollment in your name and reviewing deposit confirmations. A good provider does the work and shows you proof. A provider that will not show you proof is a risk regardless of price.
Do I have to switch payroll platforms to outsource payroll?
No. BEG manages payroll inside whatever system you already run, including isolved, ADP, Paychex, Gusto, Paylocity, Rippling, or QuickBooks. That is the $25 per employee per month option. If you would rather move onto BEG's isolved platform, that is $45 per employee per month, all inclusive. Most companies who resist outsourcing are actually resisting migration, and migration is optional.
How long does it take to hand payroll off to a provider?
BEG runs live payroll in 3 to 5 business days from signing when you stay on your existing system, because there is no data conversion, no parallel run, and no reimplementation. Moving onto a new platform is a longer project, generally aligned to a quarter close so that year to date wage and tax totals carry cleanly. If a provider tells you a platform migration takes a week, ask what happens to your quarterly filings.
Is outsourcing payroll cheaper than hiring a payroll administrator?
For most companies between 25 and 100 employees, yes. A dedicated payroll or HR administrator costs $60,000 to $100,000 per year in salary, plus payroll taxes, benefits, software, and the risk that the role sits vacant for two months. Managed payroll at $25 to $45 per employee per month costs $750 to $4,500 per month at that headcount. The comparison is not software versus service. It is service versus a salary.
What happens when the IRS or a state agency sends a payroll tax notice?
BEG handles it. Tax notices arrive for ordinary reasons: a rate change that was not applied, a deposit posted to the wrong quarter, a state unemployment account that was never registered. Someone has to read the notice, reconstruct the filing, and respond inside the deadline. That is the work most business owners never budget for, and it is included at both price points.
Authoritative source: IRS: Outsourcing Payroll and Third Party Payers
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