Save Money

Many nonprofit managers underestimate the cost of processing payroll internally by failing to account for all hours spent and resources allocated to pay employees and maintain payroll paperwork.

A thorough cost assessment usually proves that a nonprofit saves money by outsourcing the processing, tracking and filing of payroll documents. To assess your own internal payroll costs, consider:

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• How much the time spent is actually worth: consider the cost of your time and the time of anyone who processes or “touches” payroll? Often, many people in a small church are involved in the various parts of payroll processing.

• What savings would outsourcing provide: since an outside provider can handle all the responsibilities involved in managing payroll and answering employee questions, a church can often eliminate or reallocate an internal payroll resource?

Avoid Penalties

Calculating federal, state, and local employment taxes and filing payroll-related tax paperwork can be more than just a hassle. If it’s done incorrectly, your organization may face penalties and even interest on money owed since the mistake was made.

In fact, it is estimated that one in three nonprofits receive a tax penalty costing over $800 each year. Outsourcing payroll does away with the risk of many of these costs and hassles because:

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• An outsourced payroll provider calculates payroll taxes, based on its expertise and close tracking of regulation changes

• Monthly or quarterly employment tax reports are managed by the payroll service, ensuring they are submitted correctly and on time

• Payroll providers may assume penalties that come as a result of incorrect tax calculations

• End-of-year paperwork — such as W-2s and 1099s — are handled directly by the payroll provider, so they are sent out on time.