Payroll outsourcing transfers payroll processing, tax calculations, deposits, and filings to a third-party provider, letting employers focus on their core business.
Why payroll outsourcing matters for employers
Payroll is one of the most complex and error-prone administrative functions a business manages. The combination of ever-changing tax laws, multi-state compliance requirements, benefit coordination, and strict deposit deadlines creates significant risk for employers who process payroll in-house without specialized expertise.
Payroll outsourcing transfers this complexity to a provider whose core competency is payroll compliance. Outsourced providers handle tax calculations, payroll tax deposits, quarterly and annual filings (Forms 941, 940, W-2, W-3), direct deposit processing, garnishment administration, and year-end W-2 production.
The spectrum of payroll outsourcing ranges from software-based processing (the employer still makes decisions and reviews filings) to fully managed payroll (the provider handles everything end-to-end with the employer approving payroll each period). Fully managed payroll is the higher-value option for businesses that want payroll off their plate entirely.
Cost savings from outsourcing come from multiple sources: eliminating internal payroll staff costs, avoiding penalties from compliance errors (IRS penalties alone average $845 per small business per year according to IRS data), and reducing the time owners and managers spend on payroll administration.
When evaluating payroll outsourcing, key questions include: what is the provider's tax filing accuracy guarantee, how are errors corrected and who pays associated penalties, what is included versus billed as add-ons, how many pay runs are included, and what notice is required for off-cycle payrolls.
Why BEG Managed Payroll is different from software-only outsourcing
BEG Managed Payroll is a fully managed service at $25-$45 PEPM. We handle everything - processing, tax deposits, filings, and compliance - so employers can focus on their business. Learn about BEG Managed Payroll. Learn about BEG Managed Payroll.
Frequently asked questions
What is the difference between payroll software and managed payroll?
Payroll software automates calculations but still requires the employer to review, approve, and manage the process. Managed payroll places a provider in charge of the entire process end-to-end, with the employer approving the final payroll run.
Who is responsible for payroll tax errors when using an outsourced provider?
This depends on the agreement. Fully managed providers typically assume liability for errors caused by their processing. Software-only providers typically disclaim liability for employer input errors. Always clarify the error correction policy before signing.
What does payroll outsourcing typically cost?
Pricing models vary: per-employee per-month (PEPM), per-payroll-run, or flat monthly fee. BEG Managed Payroll charges $25-$45 PEPM for fully managed service, which is all-inclusive. Some national providers charge additional fees for each filing, W-2, or off-cycle run.
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About the author
Anthony Moretti is VP of Sales at Business Executive Group, where he builds BEG's managed payroll and HR service verticals for employers across Dallas-Fort Worth and nationwide. He writes the BEG Payroll Glossary to give employers plain-English answers on payroll and compliance.
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