Payroll outsourcing: your invisible partner

Staffing firms are busy doing what they do best — interviewing candidates, selling staffing services to potential clients and marketing their firm to those potential clients — all while keeping one step ahead of the competition. Full-service payroll funding for staffing companies serves the role of an administrative branch of the staffing firm.


Virtually all employee and client communication is done in the name of the staffing agency, including issuing payroll checks, invoicing clients and making collection calls. The payroll funding company also:


  • Pays and reports all quarterly payroll taxes to the Internal Revenue Service on behalf of the staffing firm


  • Generates all W-2s in its name. This allows the staffing firm to maintain control over the process, while the payroll funding firm operates as an invisible partner.


Full-service funding is an immense benefit for staffing firms that don’t want the headaches of processing payroll or the hassles of filing timely quarterly payroll tax reports to the IRS. In addition, payroll funding companies provide weekly client credit reports.


While your payroll funding company acts as an invisible partner, it is in your best interest to share the partnership with your customers. They are most likely curious about how you get funding for your business, and this both assures them of your financial strength and ensures customers send payments to the correct address, maintaining a consistent cash flow.


You should inform customers through both a UCC notification letter, which the payroll factor mails to each customer to disclose the relationship, and a personal call, so they are not caught off guard by the letter.


If your client requests a letter of financial strength, your payroll factor should be able to both create and send the letter to assure the customer you have access to funding.


In addition, although your payroll funding partner helps get funding for a business and handles administrative functions, you still have a role in the process.


Once you sign an agreement, you will need to provide names, Social Security numbers and other employee information, as well as a list of your accounts receivable invoices and copies of the invoices and time sheets As new employees are hired, current ones leave the company or pay grades change, you’ll need to update the payroll funding company. You also need to send accounts receivable invoices as you generate them and provide the company with tax documents.