A Comprehensive Guide to General Payroll Costs: What You Need to Know

You're ready to streamline your operations and ease your mind by diving into the world of outsourcing HR and payroll. But, getting a payroll quote can be a bit tricky. With numerous variables to consider, like the size of your workforce, processing costs, and any additional fees. Finding the right fit can feel overwhelming. It’s crucial to identify a provider who understands your unique situation and can offer a tailored solution.

Before you get lost in all the industry terms and details from providers, let's break it down together to help you make a savvy decision. Understanding payroll pricing is crucial. Knowing how costs are influenced by service levels, additional features, and potential hidden fees will help you confidently compare quotes and choose the best solution for your business.

At Paragon, we've proudly served the cannabis community since 2016, earning the trust of over 400 clients and managing payroll for thousands of employees. Our extensive experience in the industry allows us to provide specialized solutions that meet the unique challenges faced by cannabis businesses, ensuring compliance and peace of mind.

Below, we’ll unravel everything you need to know about the costs of outsourcing payroll processing. By the end, you'll feel confident in picking a solution that fits your business like a glove.

What Does It Mean to ‘Outsource Payroll’?

Outsourcing payroll involves transferring the management of wages, benefits, and taxes to a specialized company. This can save time and resources, reduce errors, and ensure compliance with regulations. It allows businesses to focus on core functions and growth while experts handle payroll efficiently.

Instead of handling all these details in-house, you hire a payroll service provider to handle payroll processing, tax calculations, issuing paychecks or direct deposits, and ensuring you're compliant with legal requirements. This frees you up to focus more on what you do best—running your business.

Breaking Down Payroll Costs: What You Need to Know

Payroll processing costs can vary, but the formulas are simpler than they may seem at first. And the more you understand going into it, the better you can get what you need. Here's a quick breakdown of the common pricing structures you'll come across:

• Per Employee Per Month (PEPM) is just like it sounds: you pay a fee for every employee on your books. This is ideal for small to medium-sized businesses with a stable employee count looking for predictable monthly costs. Basic payroll services usually range from $5 to $15 per employee per month, while comprehensive Human Capital Management (HCM) solutions might range from $20 to $50 per employee.
• Per Employee Per Pay (PEPP) Instead of a monthly fee, you're billed per employee each pay period, making this model ideal for businesses with fluctuating or seasonal staffing. Costs are based on transactions or checks processed, ranging from $1 to $5 per employee per pay period, with variations depending on the provider and service complexity.
• Bundled Packages: Bundled packages are ideal for growing businesses, combining payroll processing, HR, time and attendance, and benefits administration at a discounted rate. Like a combo meal, these bundles offer cost savings by integrating multiple services into one package.

What Factors Influence the Cost of Payroll Processing?

Understanding why payroll processing costs vary helps you anticipate expenses. Several factors can affect costs, so being aware of these influences is crucial.

• Company Size: Larger companies with more employees typically face higher costs due to the complexity of payroll processing. Small businesses might benefit from streamlined PEPM services, while larger enterprises might find value in comprehensive HCM solutions.
• Business Complexity: Companies with multiple locations, diverse pay schedules, or specific compliance needs may incur higher payroll costs. Industries with unique regulations, like cannabis or hospitality, often require customized payroll solutions, which can lead to additional fees due to specialized services.
• Industry Requirements: Businesses in ‘high-risk’ industries like cannabis or gambling, with stricter compliance demands, may have additional fees.

What Extra Costs Might Come from Customization and Integration?

Customization and integration can enhance the efficiency and effectiveness of your payroll system, but they often come with additional expenses. These extra costs can arise from:

• Software Integration: Integrating payroll and HCM software with your existing systems can add to your expenses, particularly for businesses with complex IT infrastructures or specific software requirements. In other words, it might cost more if your setup is complicated or if you have special software needs.
• Customization: Tailoring services to fit your specific business needs may involve additional costs, particularly for businesses needing unique reporting capabilities or employee management features.

Additional Expenses and Fees

Be aware of potential additional costs that you might not anticipate.

• Setup and Training: Initial setup and training fees can vary based on the scope and complexity of your project, essential for businesses transitioning to new payroll solutions or integrating advanced HR functionalities.
• Quarterly and Annual Fees: Separate charges for handling quarterly tax filings and year-end tax forms, crucial for businesses needing comprehensive tax compliance support.
• Compliance Updates: Costs associated with staying up-to-date with changing regulations, which some providers may pass on through software updates, critical for businesses in regulated industries like finance or legal services.
• Delivery Fees: Charges for delivering paychecks via courier services, important for businesses with dispersed or remote workforce locations.

How to Keep Payroll Costs Low: Tips for Effective Management

How can you keep your costs low? To help manage your payroll expenses effectively, consider these tips:

Bundle your services: Opting for bundled packages allows you to access multiple services at a lower overall cost, which is suitable for businesses needing integrated payroll, HR, and timekeeping solutions.

Opt for automation: Automating payroll processes helps reduce errors and save valuable time, making it beneficial for businesses looking to streamline operations and cut down on administrative overhead.

Review your pay cycles: Examining the frequency of your payroll cycles can have a significant impact on costs. For example, switching from weekly to bi-weekly paychecks can help businesses optimize payroll processing efficiency.

Negotiate for the best deal: Discussing with providers to customize quotes that fit your business needs can be particularly useful for businesses with unique payroll processing requirements or budget constraints.

Finding Your Payroll Solution

Outsourcing payroll can boost efficiency and keep you compliant, but it's crucial to understand the costs and pricing models. Providers may offer different structures, like per-employee fees or flat rates. Evaluate what's included in each package and how it fits your needs and budget. Thorough research and comparison will help you find the best value and enhance your payroll efficiency.

By assessing your company size, needed services, and desired support, you'll be ready to choose the best payroll solution. This ensures a tailored fit for your business, leading to more efficient operations and success. Taking the time to evaluate these factors can streamline your payroll process and allow you to focus on growing your business with confidence.

 Keep going, and you'll soon see your payroll process working like a dream for your whole team!

How to Start Enhancing Your Payroll Efficiency Today

Navigating payroll costs and selecting the right outsourcing solution is pivotal for optimizing business operations. Here are the steps to take next:

1. Assess Your Business Needs: Evaluate your company size, employee count, and specific payroll requirements. Determine whether a PEPM, PEPP, or bundled package aligns best with your operational structure and budget.
2. Request Customized Quotes: Reach out to payroll service providers like Paragon to discuss tailored solutions. Negotiate pricing and service packages that accommodate your unique payroll processing needs and financial constraints.
3. Explore Automation Opportunities: Investigate automated payroll solutions to minimize errors and streamline administrative tasks. Look for features that integrate seamlessly with your existing systems to enhance efficiency.
4. Review Compliance Requirements: Stay informed about industry regulations and compliance standards relevant to your business. Ensure your chosen payroll solution includes robust support for tax filings, regulatory updates, and legal requirements.
5. Plan for Implementation: Plan for the setup and training involved in transitioning to a new payroll solution. Allocate resources and timeframes to facilitate a smooth integration process without disrupting daily operations.
6. Have Peace of Mind: This comprehensive approach confirms that your payroll processes are optimized, efficient, and compliant, allowing you to focus on running your business without worry.

Feeling stuck? Reach out to the team at Paragon. We can help you make sense of payroll so you can get back to doing what you do best.