Around 50% of businesses admit they're unhappy with their HR administration processes. 54% admit there's room for improvement in their payroll processes. And the average business owner spends around 40% of their time dealing with HR administration. In short, HR is a massive pain point for business owners. So, is it really surprising that hundreds of thousands of businesses outsource HR responsibilities to third-party firms to help them navigate the shark-infested waters of human resources?
When you first start looking for HR assistance — especially payroll assistance — you won't find a shortage of options. There are PEOs, payroll processors, and CPAs. Even between those three options, you have to consider whether you want to work with a massive, national agency or a smaller, local solution. It is not easy! Your options are overwhelming.
Based on price and ROI, you have six major payroll service options to help you with your payroll:
- National PEO
- Local PEO
- National payroll processor
- Local payroll processor
- National CPA
- Local CPA
So which one should you choose? To help, we're going to break down the pros and cons of each solution.
Going to Bat With National PEOs, Payroll Processors, and CPAs
It's easy to lump all the national providers together. They all have an overwhelming number of employees and offices. And they all have top-dollar marketing campaigns and client acquisition strategies. But there are a few differences. CPAs and payroll processors generally only handle payroll. Professional Employer Organizations (PEOs) virtually manage your entire HR administration workload (e.g., payroll, compliance, benefits, workers' compensation)
With payroll processors and CPAs, your ROI is going to be low. It's not uncommon to have negative ROI in exchange for reduced payroll headaches. And that isn't necessarily a bad thing. 40% of small business owners believe payroll is the hardest part of their jobs. 40% incur IRS penalties due to inaccurate payroll handling, and payroll issues impact 54% of Americans. So, payroll is definitely a significant pain point.
Here's the thing: PEOs also offer payroll, but they also offer additional HR administration services bundled under one banner. It's economies-of-scale. The ROI of a PEO is 27% — much higher than either CPAs or payroll processors.
You will almost certainly get a positive ROI working with national PEOs. But you'll also be paying through the teeth. National payroll processors, PEOs, and CPAs cost more than their local counterparts. And you aren't getting extra benefits for your spend. You're paying for their overhead, marketing campaigns, and offices — not superior service.
As an example, national PEOs often charge a flat fee in addition to charging a percentage of payroll. Plus, they often tack on "extra" charges like "processing fees," "delivery fees," and "tax fees." These hidden costs help them pay for their high overhead. You'll still come out with a positive ROI if you work with one, but you're paying extra for no reason.
Understanding the Limitations of Local Payroll Processors and CPAs
Local CPAs and payroll processors are usually cheaper than their national counterparts. If you're dead-set on using a payroll processor or CPA, we recommend that you go local. They'll understand local compliance requirements, have real people across the street, and form stronger, more meaningful relationships with your business.
But they don't provide a high return on your investment. The very most you'll get is a few saved man-hours from processing payroll. But, given their costs, you often end up in the negative — especially if you have under 100 employees. CPAs are similar. Technically, CPAs provide more "reach" than payroll processors, since they can also help with financial planning — which is unique to their delivery system. But, again, they only provide bookkeeping services, so they provide a lower ROI than PEOs.
How Local PEOs Provide the Best of Both Worlds
Local PEOs give you the same capabilities as national PEOs at a lower cost and with the added benefit of deeply understanding your local and state compliance needs. Unlike CPAs and payroll processors, PEOs file your employees under their federal employment tax ID number. This means that they share risk and liability with you for payroll mistakes. In-house payroll tends to have an error rate of 1 to 8%. That may not sound like much, but since it only takes one mistake to incur an IRS penalty and two mistakes to send your employees looking for another job, those tiny mistakes add up fast.
Since PEOs are incentivized by pay and risk, they can reduce your overall payroll error rate and eliminate payroll compliance burdens. Get this: local PEOs are in the same price range as payroll processors and CPAs. And we're just getting started. In addition to payroll, PEOs provide:
- Affordable benefits and benefits administration
- Workers' compensation plans and claims management
- Employee handbooks and on-site employee compliance
- Assistance with OSHA and other regulatory assessments
- Administration assistance
- and more!
PEOs take all of your HR responsibilities off your shoulders — not just payroll. This gives your HR team time to focus on growth opportunities and culture. Unlike national PEOs, your local PEO doesn't have high overhead, and they don't pass those costs onto you. Most national PEOs use a "percentage of payroll" model. They charge you a percentage of your total payroll per period. This doesn't include local, state, and federal tax fees, administration costs, delivery fees, liability fees, and other hidden costs added to the backend of your bill. They'll also charge you setup fees, potentially charge you an additional per-employee fee, and even charge you customer support fees.
Remember, they have high overhead and plenty of bills to pay. Who do you think pays those bills? Local PEOs — especially in low-cost markets like Utah — have lower overhead, high value, and a deep understanding of the local ecosystem.
Are You Ready to Reduce HR Administration Headaches Without the Hassle?
Payroll processors and CPAs have their uses. But if you want the best possible ROI, the least amount of HR headaches, and a more holistic HR experience, choose a PEO. Best-in-class local PEOs like Zamp HR have another secret benefit: simple, straightforward billing. We only charge per employee per check. We don't add on "monthly base" fees, "percentage of payroll" fees, or any other secret hidden fees to line our pockets.
Let's make this simple:
If you want the most bang-for-your-buck, pick a PEO — not a CPA or payroll processor. If you want reliable, honest, and cost-effective service, partner with a local PEO — not a national chain. And if you want the best PEO in Utah, partner with Zamp HR.
Request a free quote to see how much we can save your company. We think you'll be pleasantly surprised.
