Payroll Outsourcing Companies - What You Need to Know About Pricing and Profit

The truth is, payroll outsourcing companies take a lot of the grind-work from organizations, so much so, that since the introduction of the payroll outsourcing concept more than 50 years ago, the industry has been going strong. That has always been the case for industries which provide services that actually have value. In this article, we will take a look at two aspects related to outsourcing to payroll companies, namely pricing and profit, for the purpose of acquiring enough understanding as to be able to judge how fair is fair and whether these companies really earn enough from your business.


In the past, only large companies were able to acquire payroll outsourcing services. While outsourcing payroll is offered to all, traditional outsourcing companies engage in cherry-picking, leaving small and medium-scale businesses no option but to take care of their payroll tasks themselves. Nowadays, pricing for payroll services is competitive, what with the availability of options as well as the existence of "matching services" that allows small to medium-scale business to get quotes, or bids, from a variety of payroll outsourcing companies.

Payroll outsourcing may also depend on local market condition and the cost is per paycheck. There generally is a base-account fee, with the costs of selected services added, such as payroll processing, tax administration and filing and paycheck delivery. Total costs per check can therefore range from $15 to more than $20, depending on the scale of operations, and the extent of services selected; although for small business, the amount is of course greatly reduced, sometimes with only around $5 as payment for a total-service solution. The bulk rule applies – the more services you acquire, the cheaper it gets in the long run.


A lot of people are skeptical because some companies charge so low that they cannot believe how payroll companies do all the work and still earn a profit. The truth is, payroll outsourcing companies don't just earn from what you pay them for the services outsourced. They actually earn because of interest. They earn a profit by floating the interest compounded on your account funds before the paychecks are delivered. That is why they usually wait until the last possible moment before the funds are transferred, and they keep the interest earned. Now, if you want to get the most out of their service, you can set the date when they are supposed to transfer the funds and then, have the payroll company show you records about when the transaction actually took place.

It may not be a big deal but if you consider the interest they earn from managing the funds of multiple companies, it is sizable enough. It also makes for a win-win situation. You get a cut from your payroll costs and you get to focus on core business operations, and they earn for doing it for you. Lastly, payroll companies don't just earn by providing payroll services; they also provide tax filing, data collection and more recently, employee benefits, liability management and claims management. They can also charge for extras like when you ask for customize reports or when you want customized features for payroll software.

It always helps to find out what payroll outsourcing companies are up to anyway. After all, choosing the right service provider starts with acquiring more insight about the processes.