The United States of America is home to approximately 330 million people and the largest economy in the world. It has been a leader in the global economy for more than a century, and so when multinational companies are looking for new markets to explore, the US is often right at the top of the list.
As businesses in the United States continue to face pressure to control costs and improve efficiency payroll outsourcing has become increasingly popular in the US in recent years. This is due to a number of factors, including the complexity of the US tax system and the desire of businesses to save on costs. Also, payroll outsourcing can help businesses save money by reducing or eliminating the need for in-house staff, as well as providing access to expert knowledge and resources.
Additionally, payroll outsourcing can help businesses improve their compliance with government regulations, as well as their overall efficiency and accuracy. Doing business in the United States means you can take advantage of a robust customer base and a huge depth of skilled workers in virtually all sectors and industries. However, its employment and payroll regulations are complex and can vary significantly between its 50 states.
In this article, we take a deeper look at payroll outsourcing in the US in 2022. It has been a popular topic in the US for many years. There are now many payroll outsourcing providers in the US, who are able to provide a high level of service at a reasonable cost. How has it become trendy nowadays? The sudden and complete shift to remote work due to the pandemic has meant that the workforce of most organizations is now widely spread out. As a result, organizations are hiring people much further away than they would have previously.
The US is home to a large number of businesses. These businesses have been known to outsource their payroll to reduce costs. This amazing feat of business acumen is a testament to the power of capitalism. Outsourcing payroll can be a great way for businesses to reduce costs. By outsourcing payroll, businesses can save money on labor costs, overhead costs, and other associated costs. The biggest advantage of outsourcing payroll is that businesses can avoid the hassle and burden of managing payroll internally.
There are several factors to consider when choosing a payroll outsourcing provider. Businesses should consider the provider’s reputation, cost, features, and service offerings.
Payroll Outsourcing in The US: Unique Details and Updates For 2022
Payroll in the US is a complex process, and there are many different factors to consider. Here are some key things to keep in mind when calculating payroll in the US:
– Payroll taxes must be withheld from employee wages and remitted to the government.
– Employees must be paid at least the minimum wage, which varies by state.
– Overtime pay may be required for employees who work more than 40 hours in a week.
– Payroll must be calculated correctly to avoid penalties and fines.
If you are unsure about how to calculate payroll in the US, it is best to seek professional help. Professional teams and service providers have got the most market expertise in calculating and organizing taxes. This in turn will help to avoid future penalties from authorities and the reputation of the company won’t be affected by minor errors in calculation.
Compliance is another major factor to consider when running a company. Constant changing regulations and laws require paying a decent amount of attention which is not affordable for businesses. The best way for businesses to focus on their core strategies is to hire a professional team. Payroll is an important part of running a business, and it is crucial to get it right.
Payroll Outsourcing Vendor And The Benefits It Comes With
Payroll services in the US have become increasingly popular in recent years. This is due, in part, to the rise of online payroll providers. Online payroll providers offer businesses a convenient, cost-effective way to outsource their payroll.
There are many benefits of using an online payroll provider. Online payroll providers offer businesses a host of features and benefits, including:
- Payroll automation
- Direct deposit
- Tax filing and payment
- Employee self-service
- Online access
- Reporting and analytics
Let’s have a closer look at the US payroll outsourcing recent trends.
The payroll outsourcing industry in the United States is expected to grow significantly in the next few years. In 2022, the market size of payroll outsourcing is estimated to reach $4.5 billion. This growth is being driven by a number of factors, including the increasing complexity of payroll and compliance regulations, the need for businesses to control costs, and the desire to improve employee satisfaction.
Other than that
One of the biggest trends in payroll outsourcing is the move toward cloud-based solutions. This shift provides greater flexibility and scalability for businesses, as well as improved security and compliance features. Also, cloud-based payroll solutions are often more cost-effective than traditional on-premises options. Another key trend is the increasing use of artificial intelligence (AI) in payroll processing. AI can help automate repetitive tasks and improve accuracy by identifying patterns and errors. This can free up time for payroll professionals to focus on more strategic tasks.
Major feature of outsourcing payroll is that it can help businesses tap into a global talent pool. By working with a payroll provider that has operations in multiple countries, businesses can gain access to a wider range of skills and experience. This can be especially helpful for businesses with complex payroll needs.
How Much Do Employee Benefits Cost on Average?
Employer costs in the US: Benefits and insurance can be costly for employers. There are a few ways to lower these costs, though. One way is to offer employees voluntary benefits, like health insurance, which can save employers money on premiums. Another way to keep employer costs down is to have a good insurance plan in place. This will help to keep claims low and reduce the amount of money that employers have to pay out in benefits.
Employer costs can also be reduced by offering employees incentives to stay with the company, like matching 401k contributions or bonuses. Finally, employer costs can be lowered by negotiating with vendors and suppliers for better rates.
We can use statistics gathered by the U.S. Bureau of Labor to get a good idea of what various employee benefits cost on average.
In June 2021, the bureau reported that employer costs for civilian workers averaged $38.91 per hour. Wages comprised about 69% of that number, which means that benefits made up 31% of total compensation.
- Health Insurance
Health insurance will typically be the most expensive part of your benefits plan. According to the Kaiser Family Foundation, employers pay an average of $7,188 for single and $20,576 for family coverage annually. The deductible (the amount you need to pay before the coverage kicks in) is also considerable, averaging out to about $1,655 for covered workers.
Naturally, the cost of your health insurance benefit can vary wildly from the national average. Still, in most cases, you can expect to pay between $5,000 and $30,000 annually, depending on how much participation you ask of your employees.
- Workers Compensation
Workers’ compensation insurance covers medical expenses and lost wages for employees that are injured on the job. The actual formula for calculating the cost of worker’s comp is fairly complicated, and it includes your payroll, class codes, and X-Mods. These are classifications that represent benchmarks for how risky your industry and circumstances are. If you want to learn more about these classifications and calculate your worker’s comp insurance cost, you can use our helpful calculator.
Companies that are low-risk, such as law firms, accountants, tech startups, or other office-based organizations, will have to pay relatively low premiums, usually in the range of $300 per employee, per month. However, businesses operating in high-risk industries, such as construction, can expect to pay ten times as much.
- Disability Insurance
Disability coverage kicks in if an employee is unable to work due to a non-work-related illness or injury. The employer can pay for the coverage, share the cost with the employee, or simply offer access to group coverage.
Purchasing disability insurance as an individual policy is prohibitively expensive. Setting up a group policy will significantly reduce the cost on a per-employee basis, allowing coverage to be purchased for several thousand dollars. However, only 25% of U.S. employees have access to disability insurance benefits through their employers. This low percentage makes adding disability insurance an excellent way for your benefits plan to stand out.
- Life Insurance
Life insurance benefits can help replace your employees’ income if they pass away. Adding life insurance as a group coverage is an attractive option for both the company and employees, since it’s relatively inexpensive, costing a few hundred dollars annually.
Secondly, the first $50,000 of a group life policy is not taxable for the employees. This is why larger companies often cover their employees with life insurance equal to their annual salary.
- Retirement and Employee Stock Purchase Plan
Employers will typically match their employees’ contributions to their retirement fund up to a certain point. The most common percentage employees will put towards their retirement is 2-6% of their salary.
Additionally, if you sponsor and manage your employees’ retirement plans, they’ll be able to get considerably better returns and save more in tax-free or tax-advantaged accounts.
However, retirement plans aren’t the only way to take care of your employees’ future. Many employers, especially startups, will offer their employees an option to purchase a certain amount of stocks at very reduced prices (sometimes at 10% of the market value).
If your company is successful and manages to go public, this could allow employees to make a very nice profit once they end up selling their stocks.
- Contributions to FICA
FICA is an acronym for Federal Insurance Contribution Act, and it sets regulations related to Social Security or Medicare taxes. FICA contributions are mandatory and will be equally shared by the employer and the employees. Both parties will have to pay around 7.65% of the salary each.
- Unemployment Insurance
If you lose your job without a good reason, and you meet your state’s requirements, unemployment insurance will cover a part of your income for a certain period of time.
Under the Federal Unemployment Tax Act (FUTA), employers are responsible for providing and paying for unemployment insurance for their employees. The price range is typically 0.5-1.5% of the salary.
- Other Voluntary Benefits
You may decide to offer other “quality of life” benefits such as a gym membership, yoga classes, mental health benefits, PTO, pet insurance, daycare, or a whole host of other programs designed to offer a better workplace to your employees.
The nature of these programs can vary significantly depending on your company and workforce, so it’s hard to determine how much such benefits could cost. However, the value they could bring to your employees could make them well worth whatever the cost may be.
It’s important to pick and choose the benefits you offer carefully. For instance, in the latest Staples Workplace Survey, 1,549 employees were asked about their preferences for benefits.
The study asked the participants to separate the perks and benefits into several categories and here is how they responded to each:
Benefits most likely to convince existing employees to stay:
Regular remote work: 17%
Employee discounts: 11.9%
Flexible hours: 9.2%
Paid insurance premiums: 9%
Streaming subscriptions: 7.8%
Financial assistance with professional certifications: 7.6%
Benefits employees consider must-haves:
Flexible hours: 40.2%
Paid insurance premiums: 33.6%
Paid family leave: 29.2%
Regular remote work: 26.4%
Financial assistance with professional certifications: 26.3%
Benefits employees considered nice to have but not essential:
Employee discounts: 42.7%
Free coffee and snacks: 42.3%
Streaming subscriptions: 42.2%
Gym membership reimbursement: 35.1%
Onsite fitness classes: 30.3%
Company car, laptop, or phone: 30.2%
Benefits that motivated the surveyed employees the least:
Free e-readers and e-books: 37.1%
Time off to volunteer: 26.3%
Onsite daycare: 25.9%
Daycare reimbursement: 25.3%
Onsite fitness classes: 21.7
Student loan paydowns: 20.7%
For a full list of what counts as fringe benefits, you can check out the IRS’s Fringe Benefit Guide and Publication 15-B
Why Offering Employee Benefits Is Worth It
Obviously, benefits packages cost a lot of money and take serious time and effort to put together. However, in today’s competitive job market, an employer cannot afford to not offer employee benefits coverage.
The first argument for offering a considerable benefits package is the fact that employees really, really want them. If you want to attract and retain the best talent to help take your company to the next level, then a strong employee benefits package is crucial.
It can also make the process of getting top-tier talent on board much easier for your recruiters.
In a study conducted by the Society of Human Resource Management (SHRM) 92% of employees indicated that they consider employment benefits as crucial for their overall job satisfaction. And job satisfaction isn’t just a feel-good vanity metric, it’s a crucial factor for both the productivity and retention of employees. In fact, in the same study, almost 30% of employees cited benefits as the main reason they started looking for a new job.
Employee benefits also help keep high-level employees reimbursed adequately without raising their salaries to prohibitive levels. Employees who have good health insurance, a steadily growing retirement fund, and options to buy stock will be happy to accept these tax-advantaged options over higher salaries.
How to Reduce the Cost Of Employee Benefits Programs Without Sacrificing Quality
The first thing to consider when trying to keep costs down is what coverage you’ll want to include in your program. Be sure to analyze your program regularly and ask for employee feedback, because often, there are expensive perks that your employees don’t really want or use.
Additionally, it could be a good idea to share some of the costs with your employees by allowing them to contribute. Insurance companies will typically require employees to pay a minimum amount of the premium.
Inviting employees to contribute is beneficial in two ways. Firstly, you’ll be able to get them a group deal on the coverage they couldn’t get as individuals. Secondly, suppose the employees have a financial stake in the plan. In that case, there will be less abuse and frivolous claims, ultimately reducing the cost for everyone.
However, once you agree on the percentage your employees will contribute, you should stick to it for at least a year. Insurers will see frequent changes as a sign of instability, and it may reflect poorly on your premiums.
Once you’ve decided on what benefits and policies you want to have in your plan, it’s a good idea to look into reducing their costs.
Educating your employees on how to select and use their health care and retirement benefit options could lead to considerable savings. This holds especially true for businesses with younger demographics that might not yet be 100% clear on how their benefits work and how to get the most out of them. It’s also a good idea to talk to your plan provider and see if they can provide training or guidelines for your employees.
Additionally, wellness plans are becoming a crucial part of any good employee benefits plan. Creating and offering services to encourage employees (and their families) to stay healthy can keep your insurance costs low.
Providing employees with free or heavily discounted vaccinations, cancer screens, and mental health hotlines can preclude potentially expensive claims. Adding in services that promote wellness, such as a free gym membership, yoga classes, and company-wide fitness events can also lead to a healthier and happier workplace.
For larger businesses that employ more than 100 people, it may be wise to look at alternate financial models for their benefits plan. Using an Administrative Services Only (ASO) plan could lead to significant cost reductions.
In this arrangement, the company only purchases the administrative service from the insurer while funding the insurance itself. ASO will allow companies greater control over their benefits and give them better control of their cash flow by only paying for claims when they happen, without paying a premium to the insurer.
Considering the aforementioned points encompassing payroll outsourcing, what is the role of NNRoad.
NNRoad is a global Employer of Record & PEO provider with a base in the USA. We are able to advise you and your dispatched or payroll employees in the USA on their individual income taxes. For more information on our HR and payroll related services in the United States, please visit our US services page or contact us directly.