Beyond Transaction Cost Economics

Outsourcing Payroll: Beyond Transaction Cost Economics

Payroll can be a headache for even the most experienced professionals. When you consider that there are considerable fee and penalties for tax errors payroll can become a real nightmare.

For many businesses, payroll services are an invaluable alternative to a generally, in-house process. When done correctly, your payroll service can provide less expensive, simpler means of filing you taxes and most importantly, Paying your employees. They also offer a plethora of other services that I won’t list here but they are also very helpful and time saving services.

When to outsource

While the majority of businesses in the US process paychecks internally that not always the most cost effective way to handle your payroll responsibilities. You will at the very least have to buy a computer or manual accounting program and learn how to use it. Which may be harder than it sounds depending on your level of experience with these types of systems.

Outsourcing payroll generally makes sense if you payroll changes with each pay period.For example if you have employees that work random amounts of hours each week or you have a constant flow or workers moving in and out of your company it may make more sense to outsource all of this work rather than try to process it all here to read more about payroll services.

Beyond Transaction Cost Economics

Choosing a provider

Besides actually paying your employees, payroll service providers generally offer a wide range of services and should have exceptional customer service. Unlike some other services you may use, you will generally need to communicate with your payroll service quite often.

It is a good idea to research how responsive and helpful their customer service platforms are. It is also not a bad Idea to try to use a payroll provider that is within a reasonable driving distance in case you need to go pick up checks in an more about managing payroll at


The market for payroll services is quite competitive and is usually reflective of local market conditions. Generally, the basic service cost will be between $0.80 and $2.00 a check, plus you base fee for creating an account. Added services will obviously cost more and vary from between service providers. Some providers also have fees associated with adding or dropping employees which could be very important for your business.

Each provider is going to have varying fees for some things and you should research these fees to find a provider that perfectly suits your company’s needs. Most of the time the fees and pricing of different things are negotiable with the provider. So it is not a bad idea to try to research a list of services you might be interested in and try to negotiate their rates down to save a little money.

Final Words

Payroll providers can save you a lot of time and headache. However many of them have wildly different fees and penalties for certain things. It may take some time to research and choose the right provider, but once you choose the right provider, you will not regret that work.