Outsourced Payroll: Costs and Red Flags

No, and this is the line that should not move. The payroll team prepares the pay run and the payment file; an authorised person inside your business reviews the pre-run summary and initiates or approves the payment itself. Bank account access, direct-deposit authorisation and payment execution stay with you. A provider asking for banking credentials or payment execution authority is asking for something the work does not require.

HR strategy, benefits administration, employment law advice and worker-classification decisions remain with the client and its qualified advisers. The provider can prepare agreed payroll inputs, draft registers and reconciliations for review; the authorized client approver submits the run and retains payment authority unless another arrangement is expressly authorized.

Agree a timesheet cut-off and an escalation path before the first run rather than after a missed one. Late timesheets produce late payroll, and the consequence lands on employees. Writing down the cut-off, who chases it and what happens when it slips turns a recurring argument into a process.

Not the tax treatment. Restricted stock vesting, option exercises and how they are taxed are determined through your equity platform and your tax adviser. Once that determination exists, the payroll team can process the resulting withholding correctly in the pay run.

Classification comes first and is not a payroll decision: whether someone is a contractor or an employee is a call for your employment lawyer. Once classified, contractor payments can be processed through the appropriate U.S. workflow, including 1099 records where applicable.

Compare the register with approved hours, pay-rate or salary changes, new hires and terminations, deductions and benefit changes, and known one-off payments. The authorized approver resolves unexplained variances before the payroll is submitted.

Where this work is in scope, compare payroll-register totals and payroll-liability balances with the accounting entries and payment records. Record timing differences, uncleared liabilities and unmatched payments for review rather than assuming the payroll system total is the same as the cleared bank amount.

Use the agreed late-change procedure: record the affected employee and period, obtain the required approval, determine whether the change belongs in the current or a later run, and communicate the decision to the payroll owner. Do not change a submitted payroll without an authorized instruction.

Yes. Payroll calculation, record-keeping, return preparation and filing authority are related but distinct responsibilities. The engagement should specify which returns or submissions, if any, are included and who reviews, authorizes and completes them.

Depending on the agreed scope, the handoff can include the approved payroll register, wage and deduction summaries, payroll tax and benefit liabilities, payment status, journal-entry support and a list of unresolved differences. The reviewer and responsible payroll approver remain identified in the workflow.