Why Employers Use Payroll Providers

The purpose is to relieve employers from complicated, administrative tasks.

It's important to point out that payroll is nothing new, folks have been getting paid for their labors for centuries.

However an event happened in the US less than 100 years ago that dramatically changed payroll and made it what it is today.

It's called The Current Tax Payment Act of 1943, which made it mandatory for employers to withhold federal income taxes from employee's paychecks. It shifted the law from having to pay income tax in one lump sum, to paying as you go. Essentially turning employers into tax collectors.

This was a giant leap towards collecting revenues for the US government to pay for war efforts, but it was also a giant burden placed on employers.

From that day on, employers shoulder the administrative costs and complexities that have eventually funded Social Security, Medicare, Unemployment, US, state, and local government.

It also created a new industry (Payroll). For example, ADP, initially named as Automatic Payrolls, Inc. was established in 1949 only 6 years later.

This is why employers use payroll providers.

But, as I have mentioned before, Delegating Payroll is a Choice, it's up to you to decide whether to take on the challenge yourself.