Why Do Insurers Hire Third-Party Payroll?

A person sitting at a desk, using a calculator.
By Joe Sharpe | 07/20/2023 | 19 min read

Running a business in the insurance industry requires dedication to sales, long-term agency growth and the well-being of your workforce. Achieving these goals can be more challenging when you are simultaneously navigating payroll taxes, regulatory changes, recordkeeping requirements, and a host of other manual, time-consuming tasks related to payroll, timekeeping, and HR.

For these and other reasons, more insurers are hiring third-party payroll companies to streamline their payroll processes, reduce costs, ensure tax compliance , and free up internal resources to focus on core business activities. In this article, we’ll explore the numerous benefits of collaborating with a third-party payroll provider, including how it can reduce costs and time spent while streamlining business operations and improving employee satisfaction.

Benefits of Third-Party Payroll for Insurers

When insurers manage payroll in-house – often using a manual, paper-based approach, or disjointed software tools – it detracts from core business goals, invites inaccuracies, and lowers employee satisfaction both for HR personnel and the rest of the workforce. Since most insurance agencies understandably lack the software tools and payroll expertise to manage payroll effectively, it’s common for businesses to miss an updated employment regulation, implement inadequate data security, make a late payment, or make an important miscalculation that affects employee retention or tax compliance.

Outsourcing payroll to a qualified payroll provider can help you return focus to the bottom line while allowing payroll experts to maintain ongoing compliance and provide automated software that greatly improves payroll accuracy, efficiency, costs, data security, and employee satisfaction. Let’s explore the major benefits of working with a third-party payroll provider below.

Cost Reduction

Although working with a payroll provider requires some investment in software, customer support, and access to a 24-7 automated platform, it regularly saves insurers money by eliminating payroll errors that could lead to fines, penalties, legal action or other liabilities resulting from mismanaged payroll or timekeeping.

As just one example, We offer an employee self-service portal that grants employees mobile, 24-7 access to their pay information in a platform where they can also report hours, review/manage withholdings, and update direct deposit information. Offering employees transparent and easy access to this information improves employee satisfaction, focus, and productivity, while reducing the likelihood of employee retention issues resulting from late payment or a dispute about payroll or timekeeping. With the cost of employee turnover and employee replacement at an all-time high, the small investment in third-party payroll can reduce long-term workforce costs.

Tax Compliance

A third-party payroll provider can help your business adhere to shifting local, state, and federal tax requirements that apply to one or multiple jurisdictions where you operate. With tax compliance and ongoing access to a Payroll Guide, we can keep you up to date with any applicable tax changes. Additionally, tax compliance is built directly into our software so that all of the local, state, and federal taxes or nuances that specifically apply to your business are addressed and automated in the payroll platform.

Improved Accuracy and Efficiency

Outsourcing payroll in the insurance industry can also help you eliminate common mistakes, inaccuracies and inefficiencies that occur while using a manual or disjointed digital process. Instead, by implementing one automated, cloud-based platform for you and your employees, you can streamline all of the following tasks:

  • Payroll tax calculations, payments, and filings (including deductions)
  • Annual and quarterly reporting
  • End-of-year processing (W-2s, W-3s, 1099s, Wage and Tax Statement, ACA, and more)
  • Pay as you go Workers’ compensation
  • Electronic wage garnishment processing and payments
  • Employee self-service tools and employee pay (incorporating direct deposit or other options)
  • New hire and employee recordkeeping and reporting
  • Integration of payroll data with timekeeping, benefits administration, and other HR processes

Time and Resource Management

One immediately felt benefit of outsourcing insurance payroll services is that it grants you and your employees more time, energy, and peace of mind to focus on core business tasks. Any personnel who were previously extending their job responsibilities to include payroll-related obligations can instead maximize their talents in other key areas. Whether it’s sales, business growth, attracting top talent, improving client service, or another business goal, a third-party payroll provider allows you and your employees to prioritize these goals, minimizing concerns about noncompliance, inaccurate payroll taxes, late payments, or employee dissatisfaction.

Enhanced Data Security

When employee, business, and payroll data is stored in a physical location or in a range of digital locations, this can compromise security and even lead to incidents of fraud. A reputable third-party payroll provider will use leading-edge technology that protects and encrypts all of your confidential data, eliminating the need to keep paper documents or individual digital files in potentially unprotected settings. Within our payroll platform, employers can also set permissions to enable varying degrees of access to payroll tasks and payroll information on an employee-by-employee basis, delegating HR responsibilities as needed.

Factors to Consider When Choosing a Third-Party Payroll Provider

Even if the benefits of working with a third-party payroll provider are already clear, it’s crucial to understand which factors are most important to consider and evaluate when choosing the right provider for your specific business.

Reputation and Experience

A qualified payroll provider should be established within the industry, able to direct you to a range of client testimonials, and able to demonstrate successful payroll/HR implementations for businesses similar to your own (based on industry, size of workforce, or particular goals). Of course, it’s also important to choose a reliable partner that offers tailored and personalized support: all of the tools and expertise needed to meet the specific and singular goals of your business.

Technology and Integration

Payroll support alone is tremendously helpful for insurers, but this can be further leveraged to integrate payroll (and payroll data) with other HR processes like benefits administration, timekeeping, workforce management, and more. Our payroll platform can be easily integrated with HR management (recruitment, hiring, onboarding), talent management, workforce management and other solutions, all available in a single digital platform. When data and processes are integrated and consolidated across all areas of HCM, this can streamline all of your business operations and create many beneficial opportunities for advanced reporting: analyzing timekeeping or PTO trends, employee- or department-based productivity, the success of particular projects, and more.

Customer Service and Support

A qualified third-party payroll provider may emphasize customer service and support, but sometimes this is lacking (in practice) due to an overemphasis on technology-based solutions. We strive to pair the most leading-edge technology with the most personalized and accessible customer support possible.

Each of our clients is paired with a Payroll Guide, a representative who answers any payroll, tax, or HR-related questions and ensures ongoing compliance with all current and forthcoming payroll and tax considerations. In addition to these services, your Payroll Guide will work with you to fine-tune payroll processes and identify tax credits for which your business may be eligible, whether it’s employee retention credit (ERC), work opportunity tax credit (WOTC), or otherwise.

Pricing and Contracts

Some third-party payroll providers adopt a one-size-fits-all approach to pricing and contracts, which can leave insurers feeling frustrated about the prospect of making changes to services as needed (including upgrading services to match business growth). That’s why we offer a range of packages – Essential, Professional, Enterprise, and Flex – each of which feature unique services designed to meet the specific needs of your business based on the size of your workforce, payroll frequency, and other factors. For medium-sized businesses and large businesses, we offer a convenient per-employee rate.

Customization and Scalability

As with pricing and contracts, it’s essential for your payroll provider to remain adaptable (and capable) of scaling with the growth of your business and incorporating customized services and features as your business and its needs evolve. We can help you evaluate all of the factors that affect your business to help you choose a payroll and HR solution that is right for you, dynamically adjusting your services as any changes occur, whether it’s to employee classifications, pay frequency, or other factors.

Optimize Insurance Payroll and HR

Working with a third-party payroll provider can bring a range of benefits to insurers, but it’s important to choose a provider that offers every feature you need and adapts to your evolving business goals. That’s why we offer a comprehensive payroll solution with personalized customer support, employee self-service, and seamless integration with your related HR processes.

Ready to streamline your insurance company’s payroll and HR processes to ensure long-term compliance, employee satisfaction, and business growth? Take the first step today towards a lasting payroll solution.

DISCLAIMER: The information provided herein does not constitute the provision of legal advice, tax advice, accounting services or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional legal, tax, accounting, or other professional advisers. Before making any decision or taking any action, you should consult a professional adviser who has been provided with all pertinent facts relevant to your particular situation and for your particular state(s) of operation.