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Empagio Study of Executives Nationwide Finds Outsourcing Reduces Payroll Tax Penalties
ATLANTA --(Business Wire)-- Reduced payroll tax penalties are only one of the benefits for companies that outsource payroll processes or payroll tax filing, according to the 2006 Empagio Executive Study on Payroll and Tax Filing, a national survey of financial and human resources (HR) executives. Among respondents whose companies outsource, nearly three-quarters (72 percent) report outsourcing has reduced the dollar value and 69 percent report outsourcing has reduced the number of payroll tax penalties.
Nearly all U.S. executives surveyed (96 percent) also believe "time is money." This study seeks to understand payroll and payroll tax filing trends for companies that outsource or retain those processes in-house. The free report may be downloaded at www.empagio.com/survey.
"Executives understand the top- and bottom-line benefits to outsourcing payroll and tax filing," said Randy Cooper, CEO of Empagio. "Many companies today have outsourced for over a decade. And when asked why they outsource, increased efficiency, time and cost savings topped the list. Executives clearly recognize the value of outsourcing - even though there are some concerns like the lack of responsiveness and customer service."
According to the majority of executives whose companies outsource, the main reasons for outsourcing are efficiency (68 percent), saving time (47 percent) and saving money (31 percent). Other reasons include fewer headaches (18 percent), more time to focus on other areas of the department (18 percent), reduced errors (17 percent), more time to focus on strategy (9 percent) and customer service (5 percent).
Overall, the majority of executives nationwide (74 percent) report they have some concerns about outsourcing. Of these, 43 percent say lack of responsiveness is their top concern, followed by:
-- Lack of customer service (35 percent)
-- Non-compliant reporting (18 percent)
-- Poor quality or ineffective technology/product (18 percent)
-- Concern that returns will not be completed on time (18 percent)
-- Volume of tracers (six percent)
-- Too many penalties (five percent)
Payroll and Payroll Tax Filing Industry Trends
Forty-three percent of executives nationwide say their organizations outsource payroll tax filing entirely or use a combination of outsourcing and in-house processes or solutions. Twenty-nine percent of U.S. executives currently handle payroll tax filing in-house, using third-party vendor software, while 28 percent say they use a proprietary software or technology program.
When it comes to payroll processing, 35 percent of U.S. executives report their companies outsource payroll services entirely or use a combination of outsourcing and in-house. Thirty-eight percent of executives say their company handles those services in-house using third-party vendor software and 27 percent say they use an internally developed payroll system.
A large variance is seen in the volume of tax agency reporting requirements. Nearly one-third (30 percent) of U.S. executives report their company deals with less than 10 Federal Employee Identification Numbers (FEIN), state and local tax agencies, but nearly the same (27 percent) say they have more than 250. Sixteen percent say their company has 11 to 25, 10 percent say 20 to 50, 11 percent say 51 to 100 and six percent say their company deals with 101 to 250 FEINs, state and local tax agencies.
When it comes to federal, state and local tax agency inquiries or tracers, 44 percent of executives nationwide report they respond to more than 50 tracers annually, 28 percent say they respond to 11 to 50 and an equal number to 10 or less.
Executives today see many challenges when it comes to payroll and payroll tax filing. When asked about their organization's greatest challenge to payroll processing and payroll tax filing executives identify:
-- Remaining compliant with government regulations and legislation (57 percent)
-- Multi-tasking (32 percent)
-- Departmental expertise (23 percent)
-- High employee turnover (21 percent)
-- Late completion of returns (four percent)
When asked about the average number of payroll tax filing penalties received each year, the majority of U.S. executives (70 percent) say their company receives 10 or fewer penalties. Eleven percent of respondents say their company receives between 11 and 25 penalties, four percent say between 26 and 50 penalties, and 13 percent report their company receives more than 50 penalties annually.
According to 74 percent of executives nationwide, the average total dollar value of payroll tax filing penalties their company receives annually is less than $25,000. Seven percent report between $25,000 and $50,000, an equal number between $50,000 and $75,000, and 12 percent say $75,000 or more.
Seventy-nine percent of executives nationwide believe it is important to be able to access payroll and payroll tax filing data via the Internet.
Outsourcing Trends for Payroll and Payroll Tax Filing
More than half (56 percent) of executives indicate their companies outsource at least one payroll or payroll tax filing service. The vast majority (88 percent) of executives whose companies outsource find it important to have payroll processes and payroll tax filing provided by a single outsourced provider.
Of executives whose companies outsource, 40 percent say their company has outsourced for 10 or more years. Thirty-seven percent say their company has outsourced for one to five years, 20 percent say six to nine years and only three percent say their company has outsourced for less than one year.
The majority of executives (58 percent) whose companies outsource say their companies outsource check printing and nearly an equal number (57 percent) outsource checks and electronic fund transfers, including direct deposit of paychecks and electronic transfer of funds. Other tasks managed through outsourcing include:
-- Year-end tax forms (52 percent)
-- Processing services (48 percent)
-- Tax reporting and filing (42 percent)
-- Administration of pay deductions (38 percent)
-- Administration of pay garnishments and wage additions (30 percent)
-- Payments to third-parties from payroll (31 percent)
-- Calculation of net pay from gross (28 percent)
-- Employment verification (17 percent)
-- Reconciliation of payroll errors (14 percent)
-- Timekeeping (11 percent)
According to U.S. executives, when it comes to payroll services and payroll tax filing, the four most valuable services an outsourced solution can provide are filing tax forms with all federal, state and local agencies (44 percent), updates on compliance regulations (39 percent), payroll or ensuring payments are deposited on time, every time (30 percent), and processing or calculating tax liabilities and collecting funds (30 percent). Resolution and inquiries were noted as the most valuable by 17 percent, followed by reconciling (15 percent) and reducing the occurrence of noncompliance penalties (15 percent).
When asked about the most important aspect of outsourcing, more than half (54 percent) of executives nationwide report saving money is "very important," followed by:
-- Fewer errors (48 percent)
-- Time-savings (46 percent)
-- Workflow efficiency (46 percent)
-- Customer service (36 percent)
-- Fewer headaches (32 percent)
-- More time to focus on other areas of the department (32 percent)
-- More time to focus on strategy (31 percent)
While 72 percent of executives whose companies outsource report outsourcing has reduced the dollar amount of tax penalties, 27 percent say the dollar amount remains unchanged. One percent say the dollar amount increased somewhat.
While 69 percent of executives whose companies outsource report outsourcing has reduced the number of payroll tax penalties, 29 percent of U.S. executives indicate outsourcing has not changed the number of penalties their company receives. Two percent say the number has increased somewhat.
While nearly all executives who outsource (97 percent) are satisfied with their current outsourcing provider(s), issues with outsourcing do not go unnoticed. Almost one-quarter (24 percent) of U.S. executives say there is a likelihood they could switch to a new outsourcing provider.
"More than one-third of executives say they are planning to change how they manage their company's payroll and tax filing processes or are reviewing their options," said Cooper. "Our study also shows that 20 percent of executives say their companies no longer outsource due to poor customer service. This data illustrates that outsourcing providers should carefully examine their ability to satisfy customers and build stronger relationships with their clients."
Reporting and Compliance
To stay compliant with payroll tax requirements imposed by various government agencies, companies use multiple avenues to stay compliant. According to the study, half of U.S. executives (50 percent) report they use an in-house system, more than one-third (37 percent) use an outsourced service, 35 percent utilize government periodicals and 23 percent subscribe to Central Clearing Houses (CCH).
The majority of U.S. executives (68 percent) say they often feel the need to customize reports to get needed tax compliance data. Twenty-six percent say they rarely need customized reports and only 6 percent say they never need customized reports.
When asked if Sarbanes-Oxley (SOX) compliance has made it easier or harder to do their job, two-thirds (66 percent) of executives say SOX makes their job harder. One in three (34 percent) say SOX has made it easier to do their job.
Executives are split on the greatest challenge with SOX compliance. Twenty-five percent feel the cost of implementing SOX poses the greatest challenge, an equal number (25 percent) feel the financial burden of staying compliant, and 23 percent the overall hassle of SOX.
Workplace Trends
When asked about the level of respect different departments in the workplace receive, U.S. executives say finance and accounting get the most respect (53 percent). Executive management came in second (49 percent). Bringing up a close third is the legal department (48 percent). On the flip side, sales is seen as the least respected according to 12 percent, closely followed by HR, marketing/advertising/pr and information technology, each listed by 11 percent.
When asked about the most annoying business buzz words used in the workplace, respondents say "value-added," leads the way (42 percent). "Best practice" came in a close second (41 percent) and "core competency" came in third (34 percent).
When asked if their company were a television show, 34 percent of executives compared their office to CSI or "smart and focused," 25 percent likened their company to Survivor or an organization that is "fast-paced, competitive and cutthroat," and 16 percent feel their office could be compared to As the World Turns - in other words, "a total soap opera." Twelve percent of executives describe their company as "quirky and funny," like The Office.
About the 2006 Empagio Executive Study on Payroll and Tax Filing
A total of 209 financial and HR executives participated in this study, conducted online in September 2006. Titles of those surveyed include CEO, CFO, president, vice president, director and manager. Half (50 percent) of those surveyed say their responsibilities cover finance and accounting, 31 percent say human resources and five percent say payroll. Fifty-eight percent of respondents were female and 42 percent were male. This research study can be downloaded for free by visiting www.empagio.com/survey.
About Empagio
Atlanta-based Empagio provides human resources outsourcing (HRO) services to enable a faster transformation of human resources (HR) from mostly tactical to a greater level of strategic execution. Empagio focuses on companies in all industries, from financial services, manufacturing and transportation, to retail and the public sector. The company's solutions range from an on-demand HR management platform to the full spectrum of HRO, including HR, benefits, payroll administration and human capital management, as well as stand-alone services such as payroll tax filing. Empagio provides full administrative processing and customer support via U.S.-based service centers. Owned and operated by HALO Technology Holdings, Inc. (OTCBB: HALO), visit www.empagio.com for more information.
EDITOR'S NOTE
Camera-ready charts and graphs of the findings from the 2006 Empagio Executive Study on Payroll and Tax Filing are available by contacting Nancy Mace Jackson by phone at 404-929-0091 x209 or by email at njackson@arketi.com.
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