DIY payroll seems easy - until it isn’t. Learn when handling it yourself may cost more and how you can save.

There are many things you can do yourself, such as painting or renovating your house. But it doesn't mean you should. Just because you can rebuild your car’s transmission, should you? And just because you can ask ChatGPT to file your taxes (please don’t) doesn’t mean it will end well.

The same goes for payroll. On the surface, payroll looks deceptively simple - after all, the latest software makes running payroll seem as easy as pushing a button. But here’s the catch: if something goes wrong, the IRS doesn’t care what software you use. The liability is still yours.

Savings That Could End Up Costing You 

Here are a few cautionary tales from the trenches:

⚠️A retailer forgets to file quarterly payroll taxes and misses the deadline. Penalties snowball into thousands.

⚠️A tech startup hires remote employees in another state but fails to check local labor laws. Unexpected back taxes and compliance fines follow.

⚠️A restaurant owner fumbles a payroll cycle, paying staff late. The bigger hit? Employee trust - gone for good.

Payroll is a high-stakes game. Your employees’ livelihoods depend on it, and so does your standing with the IRS. Here’s where DIY payroll often gets risky:

THE COST OF COMPLIANCE

The biggest challenge is staying ahead of compliance. Federal and state laws, wage laws, tax rules, and multi-state reporting requirements are constantly changing. Missing one update or misinterpreting it can mean hefty fines.

Add to that - misclassifying employees, miscalculating overtime, or forgetting to file on time aren’t minor slip-ups. These are common mistakes that can cost you more than you’d ever save by managing payroll yourself. For example, an Ernst & Young (EY) study found that one in five payrolls include errors, with each costing an average of $291, and the IRS reported collecting $7 billion in penalties from employers in a single year. 

EMPLOYEE FALLOUT

Beyond fines, payroll mistakes damage morale. A survey shows that 86% of workers experience stress after missing a paycheck, and this stress can quickly lead to turnover and damaged reputation.

LOST TIME & PRODUCTIVITY

According to the EY study, the average business makes about 15 corrections per payroll period.

Some of the most time-consuming errors include failing to record sick time, time and attendance mistakes, and incorrectly setting up health savings plans.

Think about it - every hour spent on correcting errors or preparing for an audit is time not spent growing your business. 

DATA SAFETY

Payroll files are a goldmine for hackers. With names, Social Security numbers, bank details, and salaries all bundled together, a single breach can be devastating.

When Does DIY Payroll Make Sense?

If you’re a new business with only a handful of employees, all working in one state, with simple pay structures, DIY payroll might be a manageable option for a while.

But the moment you add employees, expand across state lines, or introduce complexity with commissions or benefits, the risk-reward balance tilts. What once saved you a few hundred a month could cost thousands in penalties and wasted time.

How Expert Guidance Pays Off

As your business grows, the complexities of payroll skyrocket. Multiple pay structures, new overtime rules, remote workers, and multi-state compliance - it can quickly become overwhelming, and getting help makes sense.

Today, many businesses outsource some or all of their payroll.

Here's why:

✔️Time Savings. Businesses that outsource payroll spend 50% less time on administrative tasks than those that don’t.
✔️Cost Savings. A Deloitte survey found companies saved between 10% and 40% by outsourcing payroll compared to managing it in-house.
✔️Accuracy & Compliance. Payroll experts are trained to navigate changing tax codes, reporting requirements, and benefit deductions, minimizing costly errors.
✔️Access to Better Tools. Outsourcing often includes cutting-edge technology without the upfront investment or maintenance costs.

➡️➡️READ MORE: Mental Health & The Workplace: What Every Employer Needs to Know

DIY Payroll Reality Check

At first glance, DIY payroll looks cheaper. But factor in the time spent learning labor and tax laws instead of winning customers, as well as the financial and reputational costs of errors.

So, before you handle your own payroll in-house, ask yourself the following questions:

🏹Is my business growing?
🏹Do I fully understand the tax and labor laws, including those in every state where my employees are working?
🏹Do I have enough time each week to dedicate to payroll without neglecting my customers or employees?
🏹Could my business survive IRS penalties or employee frustration (and potential turnover) due to payroll errors?
🏹Do I have systems in place to safeguard sensitive information?

If the answer is “no” to any of these, handling payroll alone may not be worth the gamble

Get Back to Running Your Business, Not Your Payroll

Your payroll is too important to handle on your own.

Trusting payroll to the experts isn’t about giving up control; it’s about protecting your business and your employees and freeing yourself to focus on growth, strategy, and serving customers while knowing your employees are paid correctly and on time.

👉 Because yes, you can handle payroll yourself. But just like building your own deck or letting your cousin design your company's website . . .  some things are better left to the pros.

Need Help?

Working with the right partner makes all the difference. As an IRS-certified PEO, we simplify the payroll process with:

🔹A cloud-based payroll portal for employers.

🔹Online employee access to pay stubs, W-2s, benefits info, and handbooks.

🔹Secure, paperless direct deposits.

We also handle onboarding, payroll tax withdrawals, and IRS deposits and provide HR support, including benefits administration and guidance on compliance.

By taking care of all this and more, you can get back to running your business, not your payroll. We're here to help, just give us a call at (800) 446-6567 or visit propelhr.com 

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More Guidance & Helpful Resources

🔶The Changing Workplace Business Series

Today’s workplace is undergoing a full transformation, but we're here to help you make sense of it all. Check out our new business series, The Changing Workplace, where we tackle important topics impacting your workplace, such as What's Next for DEI, Navigating the Flexible Work Era, and Mental Health and the Workplace

⚕️Employee Benefits Series

As healthcare costs continue to rise, employees want - and expect - benefits that reflect their values and needs. So, before you renew or make changes to your employee benefits program, check out the following:

▶️2025 Benefits Benchmark Report. This new webinar offers clear, actionable insights based on one of the most comprehensive studies in the country.  Learn how national and regional trends are reshaping benefits, how your benefits compare to the competition, and where you may be overspending. Watch the 2025 Benefits Benchmark Report ▶️HERE 

🔷How to Build an Effective Employee Benefits Package. Get control of rising costs while offering benefits employees will actually use. Follow these strategies to build a budget-friendly benefits program.

🔷The ROI of Employee Benefits. By viewing employee benefits as a strategic investment rather than an operational expense, employers can unlock measurable returns in terms of retention, productivity, and employee satisfaction.

🔷Are Your Benefits Keeping Up? If you're grappling with talent shortages, turnover, or rising costs, it’s time to take a closer look at your employee benefits program. Find out how it compares and learn how to future-proof your offerings for the next generation of workers.

About Propel HR. Propel HR is an IRS-certified PEO that has been a leading provider of human resources and payroll solutions for 25 years. Propel partners with small to mid-sized businesses to manage payroll, employee benefits, compliance, and risks, and other HR functions in a way that maximizes efficiency and reduces costs. For more information, visit propelhr.com