<i>Dear Workforce</i> Which Costs More Outsourcing Payroll Or Using A Service Bureau

March 5, 2004
Dear Cost-Conscious:

Price per paycheck is not an accurate measure; price per employee serviced would be more appropriate. The pricing would include the inputs to payroll, administration of payroll, interaction with time and attendance, check production, direct deposit, tax withholding, and filing. Best-practices cost for the full outsourcing model is between $50 and $75 per active employee. The service bureau costs about $30 per active employee.
Comparing the two models is like comparing apples to oranges; actually, maybe navel oranges to all oranges would be a better metaphor, since a service bureau model is a subset of the outsourcing model.
A service bureau provides only the payroll tool. You would choose a payroll service vendor to maintain the system and ensure that tax updates and legislative changes are reflected. Administration of payroll, however, would continue with your current staff in-house.
Conversely, in a completely outsourced model of payroll, all functions--process execution, technology and maintenance, issue resolution, compliance, and vendor management--would be turned over to an outside company.
SOURCE: Margaret-Ann Cole, Implementation Director,Mellon HR Solutions, Fort Lee, New Jersey, March 13, 2003.
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The information contained in this article is intended to provide useful information on the topic covered, but should not be construed as legal advice or a legal opinion. Also remember that state laws may differ from the federal law.
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