Small Business

Should You Outsource Payroll or Do It In-House?

by Jennifer Dunn

This post is from our friends at MyCorporation

It’s the age-old question for anyone running an eCommerce business: do I try to manage my own payroll or outsource it to a third party? While I cannot personally tell you which option would be best for your business, what I can do is provide a quick cheat sheet guide to the benefits that come with doing payroll in-house versus outsourcing to a payroll service.


If you decide to take your payroll in-house, you’ll be able to save a bit more money than you would if you worked alongside a third party. For eCommerce businesses that are very small or on a tight budget, this may also be the more convenient option.

However, it’s important to point out that payroll is not limited to simply writing checks and calling it a day. If you decide to hire employees or have already hired team members, part of the bookkeeping process includes withholding employee taxes, issuing W-2 forms, paying payroll taxes, and printing, signing, and distributing checks. You’ll also need to have a strong understanding of overtime rules, how to handle employee garnishments and child support, and information about terminating employees too. Not every eCommerce business owner has this kind of knowledge at hand or the time and effort to devote to educating themselves accordingly — which may lead to choosing the outsourcing option.


What happens when you relinquish control of your books? Outside of saving on time (and avoiding making any potential mistakes), there’s also the assurance in knowing that a reputable third party will protect your information from suffering data loss. Working with a third party essentially gives you a second set of eyes. Payroll providers are skilled in knowing what to look for and will make sure your numbers are correct and that you stay within state compliance. They can also assist with state ID filings (to make sure your state accounts are met) and make it easier to track benefits, vacation and PTO, and 401(k) information.

Make sure you do your due diligence first and research bonded providers to avoid running into any financial mishaps. If data breaches are a major concern to your eCommerce business, the IRS recommends working with payroll providers that use the EFTPS (Electronic Federal Tax Payment System). This allows businesses to register on the EFTPS system for a PIN number that confirms payments are being made on their behalf to ensure there are no missing payments.

Outsourcing your payroll does require paying a little more to the third party, but there is peace of mind that comes with knowing that your payroll operations are in the hands of trusted professionals.

About the Author

Deborah Sweeney is the CEO of MyCorporation is a leader in online legal filing services for entrepreneurs and businesses, providing start-up bundles that include corporation and LLC formation, registered agent, DBA, and trademark & copyright filing services. MyCorporation does all the work, making the business formation and maintenance quick and painless, so business owners can focus on what they do best. Follow her on Google+ and on Twitter @deborahsweeney and @mycorporation.

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