Selzer & Hollinger, a legal services firm, is considering outsourcing its payroll function. It has received a bid from ABC Payroll Services for $22,000 per year. ABC Payroll will provide all payroll processing, including employee checks and payroll tax reporting. Selzer & Hollingers costs for payroll processing in-house over the past year were as follows:

Cost	Amount
Payroll clerk (part time)	$12,000
Annual cost of payroll processing software updates	1,000
Human resources managers salary (25% annual salary)	25,000
Depreciation of computers used in payroll processing	2,000
Annual payroll tax update seminar costs for one employee	1,500

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.

Required

1. What is the annual impact of outsourcing payroll? Will the company save money or spend extra money if payroll is outsourced?
2. What qualitative factors should be considered in this decision?