Reference no: EM133072898

Question - Sipacore & Sheridan, a legal services firm, is considering outsourcing its payroll function. It has received a bid from ABC Payroll Services for $21,820 per year. ABC Payroll will provide all payroll processing, including employee checks and payroll tax reporting. Sipacore & Sheridan's costs for payroll processing in-house over the past year were as follows:

Cost Amount

Payroll clerk (part time) $12,060

Annual cost of payroll processing software updates 920

Human resources manager's salary 25,700

Depreciation of computers used in payroll processing 1,890

Annual payroll tax update seminar costs for one employee $1,370

Currently the payroll clerk works only on payroll processing, and will be laid off if payroll is outsourced. The human resources manager spends 25 percent of her time currently on payroll-related issues. She will be retained at 100% even if the company outsources. The computers would remain and be used for other tasks if payroll is outsourced. What is the annual impact of outsourcing payroll?