In this article, we tell you what payroll outsourcing is along with its benefits and what it requires to open a  payroll outsourcing services for small businesses. Carrying on business successfully means juggling a variety of business activities such as core functions, administrative jobs, etc. But what if we told you that you could outsource your job of payments to employees without you having to bother anymore? Well, that is what payroll outsourcing for small businesses is all about.

Here is a Comprehensive Guide to Knowing Payroll Outsourcing  For Small Businesses

  payroll outsourcing services  

What is Payroll Outsourcing?

Payroll outsourcing services mean contracting out your payroll administration to a third party which is an expert in the field. Such a third party integrates its services with your business cycle and your HR requirements to deliver the best services so that you can invest all your time and energy into the core functions of the business.

How does Payroll Outsourcing Work?

Payroll outsourcing services are specialized institutions that are devoted full time in dealing with the HR requirements of any given business. Such a model is extremely suitable and beneficial for small businesses where the investment is small and the executive does not want to spend a large chunk of their revenue in setting up a dedicated employee management system.

  payroll outsourcing services for small businesses  

Payroll outsourcing services have a simple method of working. The same has been explained in simple words in the following points:

    • The foremost job before a payroll outsourcing service can take control of your payrolls is sending a payroll report to the outsourced company. This report is basically used to collect vital data, including the number of employees working in the organization, the number of hours worked, the monetary benefits offered, the perks of overtime, etc. so as to reach the exact figures.
    • The aforementioned details are then added by the payroll outsourcing services to their advanced computer system which processes the information and determines the salary or wages for each employee.
    • The amount required to be disbursed is transferred by the business to the payroll outsourcing services.
    • At the end of each month or the period specified by the company, the outsourced company disburses the requisite amounts to the employees automatically without the outsourcer having to play any part in the process.
payroll outsourcing services for small businesses

How Much Money do Payroll Companies make?

Well, there is no fixed amount that payroll outsourcing companies make. The same depends on factors such as the size of the company, the volume of work, ancillary services, etc.

Like any business, payroll outsourcing companies need to make a profit in order to sustain themselves in the market. The amount charged by such companies from businesses that outsource their payroll services for SMEs to minimal work. However, a major chunk of revenue is generated by the outsourcing companies from reinvesting the amount that is received from businesses for disbursal before it is actually disbursed.

In fact, it may be mentioned here that payroll outsourcing companies wait until the last possible moment before they transfer funds as paychecks and keep any interest that is earned on such money.

  payroll outsourcing services    

Another great way how payroll outsourcing services for small businesses make money is depending on the frequency of the disbursal of payments. For instance, they charge a little extra from the outsourcer if the payment has to be made fortnightly instead of months since the service is being provided double the times as would normally be provided.

These days, payroll outsourcing companies are venturing into other related services to earn money. These include tax filing, collection of company data, etc.

How do I Start a Payroll Processing Company?

Starting payroll outsourcing services can be an arduous task if done without proper guidance. In case you too are willing to start one, here are the main elements you would need:

Processing Software

The main job of processing software is that they ease and automate the task of running  payroll services for SMEs. The cost of such software varies with respect to its functions and abilities. If you are newbie, it would be wise, to begin with, simple software and then advance to the complex versions gradually.

Processing Team

Find dedicated and reliable people who can be trained at a low cost. Consider people who are detail-oriented and who have the potential to provide you with a good volume of work in a small period of time. You may also consider experienced professionals for supervisory positions.

Referral Sources

Contact brokers, bankers, companies and other entities to bag clients. They help you gain clientele for small referral commissions. You could also indulge in social marketing to let people know about your venture.


This is perhaps the most important element of your payroll outsourcing services. Start with a small clientele and deliver quality services to them. It is not advisable to grab a large number of clients at all times. Focus on the value aspect and grab work from clients that have a good market standing. This would only reflect positively on your business.

So this was all about payroll outsourcing for small businesses. They are the sine qua non for small business and surely help ease the workload of such companies. Not only do they take control of a business’ payroll work, but they also promise to deliver services at an affordable cost well within time.

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