What Percentage of Companies Outsource Payroll?

In today’s dynamic business environment, payroll management has become a critical function for companies of all sizes. With the increasing complexity of tax regulations and the need for efficient resource allocation, many businesses are turning towards outsourcing payroll responsibilities. A significant percentage of companies, especially small to medium-sized enterprises, are now choosing to outsource their payroll to streamline operations and focus more on their core business activities. According to the National Small Business Association, 45% of business owners outsource their payroll.


Benefits of Using a PEO to Outsource Payroll Responsibilities


Improved Compliance and Reduced Risk

  • Regulatory Expertise: PEOs possess extensive knowledge of payroll-related tax laws and regulations, which vary from state to state and country to country. By outsourcing payroll to a PEO, companies benefit from this expertise, ensuring compliance and reducing the risk of penalties.
  • Keeping Up with Changes: PEOs stay updated with the latest tax laws and amendments, which is crucial for maintaining compliance in a rapidly changing legal landscape.

Cost-Effective Solutions

  • Reduced Overhead Costs: Outsourcing payroll can be more cost-effective than maintaining an in-house payroll department, especially for small and medium-sized businesses. It eliminates the need for dedicated staff, infrastructure, and systems for payroll management.
  • Economies of Scale: PEOs can provide payroll services at a lower cost due to their scale of operations, offering small businesses access to high-quality services without the hefty price tag.

Enhanced Efficiency and Accuracy

  • Streamlining Processes: PEOs use advanced payroll systems that streamline processes such as calculating pay, deductions, and tax withholdings, ensuring efficiency and accuracy.
  • Reducing Errors: The expertise and advanced technology used by PEOs significantly reduce the chances of errors, which can be costly and time-consuming to rectify.

Access to Advanced Technology

  • Sophisticated Payroll Systems: PEOs invest in the latest payroll technology, which might be too expensive for individual companies to procure and maintain. This technology often includes features like automated payroll processing, integration with time tracking, and direct deposit.
  • Data Security: PEOs employ robust security measures to protect sensitive payroll data, offering a level of security that might be hard for small businesses to achieve on their own.

Comprehensive Service Offering

  • Beyond Payroll Processing: Many PEOs offer a range of additional services, including HR management, benefits administration, and compliance support, providing an integrated solution for businesses.

Enhanced Employee Experience

  • Timely and Accurate Payroll: Employees appreciate timely and accurate paychecks. By outsourcing payroll to a PEO, businesses can ensure consistent and reliable payroll delivery, which contributes to employee satisfaction.
  • Employee Self-Service Portals: Many PEOs offer online portals where employees can access pay stubs, tax forms, and payroll-related information, enhancing the employee experience.



The decision to outsource payroll can have significant benefits for a company, ranging from cost savings and improved compliance to enhanced efficiency and employee satisfaction. With a considerable percentage of companies opting to outsource payroll, partnering with a PEO offers a compelling solution for managing this critical business function. At TANDIUM, we understand the intricacies of payroll management and are dedicated to providing comprehensive, efficient, and secure payroll services tailored to the unique needs of each client. Contact us today to learn more.