Jan 27, 2025
Why small businesses should consider outsourcing payroll automation in 2025
Upeka Bee
Barbara and Evan run a design agency, and like many small businesses, they struggle with manual payroll processes.
During their busy days, payroll processing – a task requiring precision and compliance – often gets pushed to the last minute. This means late nights for Barbara and Evan to manually track employees down for their timesheets and then calculate wages, deductions, commissions and overtime. Not only is this process time-consuming, but it’s also prone to errors, creating unnecessary stress and the constant worry of potential compliance issues.
Barbara and Evan know payroll automation could help save time, reduce mistakes, and improve efficiency. Yet, like many small businesses, they hold off, thinking their current process “gets the job done.”
However, for small businesses in 2025, payroll accuracy is no longer a “nice to have” – it’s a necessity.
Let’s take a closer look at the wide range of features and options small businesses can get by outsourcing payroll and the many benefits this model provides.
Outsourced payroll offerings for small businesses
Small businesses that outsource payroll gain access to a range of specialized services that help streamline payroll management, ensure accuracy, and reduce administrative burden. These offerings include:
Time and attendance: Outsourcing this aspect of payroll may give small businesses a better way to review and verify timekeeping information for all employees, especially if owners must focus on other priorities. HR consultants can coordinate and ensure the timekeeping approval process, notify the client of any critical errors, and audit timesheets to make sure wages will be calculated and paid correctly.
Payroll preprocessing: Outsourced HR team members can collaborate with the client’s internal employees to manage new hires, re-hires, terminations, and any other changes that could affect payroll. They can also help maintain all aspects of payroll records, including exemptions, direct deposit information, and deductions. Outsourced HR consultants can even take care of garnishments and tax levies, if required.
Payroll processing: Instead of attempting to do it themselves, small businesses can rely on outsourced HR team members to process gross-to-net payroll and then accurately record and document payroll transactions. They can also create and audit preliminary payroll reports and proactively resolve any discrepancies they may find.
Payroll post-processing: Small businesses can also turn to external experts to prepare post-processing reports, including summaries of earnings, taxes, deductions, leave, disability, 401(k), benefits, and HSA information. These HR resources can also run general ledger reports and distribute other standard reports to HR, benefits, finance, and other groups to improve end-of-month closing processes or audits.
By leveraging these outsourced payroll services, small businesses can reduce administrative burden, improve accuracy, and stay compliant – leading to many significant benefits.
Time savings and increased productivity
Let’s face it: Attempting to collect and enter payroll data adds up to more time than you might think – usually much more.
You or your managers may have to constantly chase employees to fill out timesheets or attempt to manage this same information in texts, emails, or spreadsheets.
Once they have it all, they have to total the hours, apply deductions, and calculate each employee's paycheck. Many small businesses may still even cut paper checks, a step that requires further approvals and authorization.
Managers often have to answer employees’ questions: “Why is my payout less than I thought? Why wasn’t my overtime applied?” – valuable time that could be better spent on strategic efforts to help the business grow.
Outsourcing payroll eliminates manual data collection and calculations steps that you have to perform, and streamlines the entire process. Managers don’t have to chase down missing timesheets or sort through endless emails or spreadsheets. It also removes excessive interruptions, enabling employees to focus on higher-value strategic initiatives that drive business growth.
More accurate payroll
Manual payroll processes inevitably lead to errors, often related to reading poor handwriting or rekeying data from one system to the next. And in many cases, small business owners and employees are not payroll experts. They may accidentally make a mistake that is frustrating and costly for the affected employee.
For example, misinterpreting state taxes could lead to a bigger deduction than employees were expecting. This could lead to confusion and unhappy employees, especially if the problem can’t be fixed until the next pay cycle.
Outsourced payroll management minimizes these errors by managing the calculations much more accurately. This helps ensure correct paychecks … and happier employees.
Improved compliance and cost savings
Payroll errors can affect your employees’ morale and lead to compliance audits, fines, and other penalties, which can prove devastating to your bottom line and your ability to invest in growth initiatives.
While many companies are tempted to put off investing in payroll automation – especially those companies just starting out – automating with tax and payroll software can help you save money. Just think about your true total costs, which include employees’ time, lost opportunity time, and the potential fines associated with payroll and compliance mistakes.
Managed payroll services reduce total costs by minimizing manual errors, streamlining administrative processes, and ensuring accurate, timely payroll. They also improve compliance efforts by automatically updating to reflect the latest tax laws and regulations, reducing the risk of costly fines.
Turn payroll into a competitive advantage in 2025
Running a small business means balancing too many tasks, including many that employers and employees are not familiar with. For many of these companies, payroll often becomes a daunting, time-consuming chore. While the intention is to save on expenses, the hours dedicated to manual payroll processes, addressing employees’ questions, and managing compliance can quickly add up.
As we move into 2025, the benefits of payroll outsourcing are clear for busy founders. By reducing the need for constant data collection and manual calculations, automation can help minimize errors, save time, increase productivity, and improve compliance with ever-changing tax laws.
For small business owners and operators looking to streamline critical processes, embracing payroll outsourcing is an investment that pays off in accuracy, real cost savings, and long-term peace of mind.
Explore DianaHR to learn more about payroll automation and outsourcing services.
FAQs
What is outsourced payroll?
Outsourced payroll is a method of streamlining the entire payroll process, including the calculation of wages, taxes, and deductions, by utilizing an external vendor such as DianaHR.
What payroll services can small businesses get by outsourcing their payroll?
Small businesses that outsource payroll can access a range of services, including time and attendance tracking, payroll processing, tax compliance, and benefits administration. These services help ensure accuracy, reduce administrative workload, and keep businesses compliant with ever-changing payroll regulations.
What are the benefits of payroll outsourcing?
Payroll outsourcing can help save time, minimize errors, and improve the accuracy of paychecks, all while helping the company comply with tax regulations. As a result, employees are happier and managers gain more time to focus on business priorities.
What if I just want to outsource the process? Are there payroll automation services for small businesses like mine?
Yes, there are payroll management services for small businesses like yours. For example, DianaHR offers a service that gives you access to a real human expert to manage your entire payroll process – without having to change your payroll automation tools. This model ensures accuracy, efficiency, and personalized support.
Barbara and Evan run a design agency, and like many small businesses, they struggle with manual payroll processes.
During their busy days, payroll processing – a task requiring precision and compliance – often gets pushed to the last minute. This means late nights for Barbara and Evan to manually track employees down for their timesheets and then calculate wages, deductions, commissions and overtime. Not only is this process time-consuming, but it’s also prone to errors, creating unnecessary stress and the constant worry of potential compliance issues.
Barbara and Evan know payroll automation could help save time, reduce mistakes, and improve efficiency. Yet, like many small businesses, they hold off, thinking their current process “gets the job done.”
However, for small businesses in 2025, payroll accuracy is no longer a “nice to have” – it’s a necessity.
Let’s take a closer look at the wide range of features and options small businesses can get by outsourcing payroll and the many benefits this model provides.
Outsourced payroll offerings for small businesses
Small businesses that outsource payroll gain access to a range of specialized services that help streamline payroll management, ensure accuracy, and reduce administrative burden. These offerings include:
Time and attendance: Outsourcing this aspect of payroll may give small businesses a better way to review and verify timekeeping information for all employees, especially if owners must focus on other priorities. HR consultants can coordinate and ensure the timekeeping approval process, notify the client of any critical errors, and audit timesheets to make sure wages will be calculated and paid correctly.
Payroll preprocessing: Outsourced HR team members can collaborate with the client’s internal employees to manage new hires, re-hires, terminations, and any other changes that could affect payroll. They can also help maintain all aspects of payroll records, including exemptions, direct deposit information, and deductions. Outsourced HR consultants can even take care of garnishments and tax levies, if required.
Payroll processing: Instead of attempting to do it themselves, small businesses can rely on outsourced HR team members to process gross-to-net payroll and then accurately record and document payroll transactions. They can also create and audit preliminary payroll reports and proactively resolve any discrepancies they may find.
Payroll post-processing: Small businesses can also turn to external experts to prepare post-processing reports, including summaries of earnings, taxes, deductions, leave, disability, 401(k), benefits, and HSA information. These HR resources can also run general ledger reports and distribute other standard reports to HR, benefits, finance, and other groups to improve end-of-month closing processes or audits.
By leveraging these outsourced payroll services, small businesses can reduce administrative burden, improve accuracy, and stay compliant – leading to many significant benefits.
Time savings and increased productivity
Let’s face it: Attempting to collect and enter payroll data adds up to more time than you might think – usually much more.
You or your managers may have to constantly chase employees to fill out timesheets or attempt to manage this same information in texts, emails, or spreadsheets.
Once they have it all, they have to total the hours, apply deductions, and calculate each employee's paycheck. Many small businesses may still even cut paper checks, a step that requires further approvals and authorization.
Managers often have to answer employees’ questions: “Why is my payout less than I thought? Why wasn’t my overtime applied?” – valuable time that could be better spent on strategic efforts to help the business grow.
Outsourcing payroll eliminates manual data collection and calculations steps that you have to perform, and streamlines the entire process. Managers don’t have to chase down missing timesheets or sort through endless emails or spreadsheets. It also removes excessive interruptions, enabling employees to focus on higher-value strategic initiatives that drive business growth.
More accurate payroll
Manual payroll processes inevitably lead to errors, often related to reading poor handwriting or rekeying data from one system to the next. And in many cases, small business owners and employees are not payroll experts. They may accidentally make a mistake that is frustrating and costly for the affected employee.
For example, misinterpreting state taxes could lead to a bigger deduction than employees were expecting. This could lead to confusion and unhappy employees, especially if the problem can’t be fixed until the next pay cycle.
Outsourced payroll management minimizes these errors by managing the calculations much more accurately. This helps ensure correct paychecks … and happier employees.
Improved compliance and cost savings
Payroll errors can affect your employees’ morale and lead to compliance audits, fines, and other penalties, which can prove devastating to your bottom line and your ability to invest in growth initiatives.
While many companies are tempted to put off investing in payroll automation – especially those companies just starting out – automating with tax and payroll software can help you save money. Just think about your true total costs, which include employees’ time, lost opportunity time, and the potential fines associated with payroll and compliance mistakes.
Managed payroll services reduce total costs by minimizing manual errors, streamlining administrative processes, and ensuring accurate, timely payroll. They also improve compliance efforts by automatically updating to reflect the latest tax laws and regulations, reducing the risk of costly fines.
Turn payroll into a competitive advantage in 2025
Running a small business means balancing too many tasks, including many that employers and employees are not familiar with. For many of these companies, payroll often becomes a daunting, time-consuming chore. While the intention is to save on expenses, the hours dedicated to manual payroll processes, addressing employees’ questions, and managing compliance can quickly add up.
As we move into 2025, the benefits of payroll outsourcing are clear for busy founders. By reducing the need for constant data collection and manual calculations, automation can help minimize errors, save time, increase productivity, and improve compliance with ever-changing tax laws.
For small business owners and operators looking to streamline critical processes, embracing payroll outsourcing is an investment that pays off in accuracy, real cost savings, and long-term peace of mind.
Explore DianaHR to learn more about payroll automation and outsourcing services.
FAQs
What is outsourced payroll?
Outsourced payroll is a method of streamlining the entire payroll process, including the calculation of wages, taxes, and deductions, by utilizing an external vendor such as DianaHR.
What payroll services can small businesses get by outsourcing their payroll?
Small businesses that outsource payroll can access a range of services, including time and attendance tracking, payroll processing, tax compliance, and benefits administration. These services help ensure accuracy, reduce administrative workload, and keep businesses compliant with ever-changing payroll regulations.
What are the benefits of payroll outsourcing?
Payroll outsourcing can help save time, minimize errors, and improve the accuracy of paychecks, all while helping the company comply with tax regulations. As a result, employees are happier and managers gain more time to focus on business priorities.
What if I just want to outsource the process? Are there payroll automation services for small businesses like mine?
Yes, there are payroll management services for small businesses like yours. For example, DianaHR offers a service that gives you access to a real human expert to manage your entire payroll process – without having to change your payroll automation tools. This model ensures accuracy, efficiency, and personalized support.
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