OUTSOURCED PAYROLL PROFESSIONALS
By: Mitchell Zucker
Many of our best clients were doing their own payroll before identifying the numerous benefits of paying for a professional payroll service.
The reality is that managing payroll is a significant challenge. It’s not as simple as just paying your bills and can become a considerable drain on administrative time. Even worse, if something does go wrong, the IRS, state government(s), and/or your employees will be coming after you.
The US Chamber of Commerce recently reported that over one out of three small businesses will pay a tax penalty averaging $800 to the Federal Government for incorrectly reporting payroll. Tack on state and/or local governments and the penalty amount grows.
The argument FOR doing it yourself is the perception that it’s less expensive than paying a professional to do it. For some very, very small companies with one or two employees, that MAY be the case, but its unlikely when you take into account ALL of the costs and the risk which you put your company at.
Doing it yourself will require you to spend significantly more administrative time and you will have other associated costs to “do it yourself”. For instance:
- Time to Calculate payroll-doing it yourself can amount to many hours each pay period for the person administering the payroll
- pay for payroll software—lease it, buy it, license it
- Buy check stock
- Pay for ink to print the checks
- Print checks
- Hand sign the checks
- Often have no ability for direct deposit or pay cards
- The maddening chase to keep up with tax regulations
- The exhausting IRS calls to straighten out penalty notices
- The challenging calls to payroll software company to have questions answered
- Making sure that the quarterly AND annual report deadlines are met
- The hassle and time to create W2s and 1099s
- The constant administration and communication of payroll data to employees
- Loss of time to work on more critical aspects of the business while doing mundane, complex payroll calculations
On the other hand, utilization of a professional payroll processing company offers the following benefits:
First and foremost, as to cost, depending on your annual revenue, payroll services often cost less than 0.1% of annual revenue and provide less headaches and greater peace of mind.
- Tax Payments – Federal, State, and local payroll taxes, including unemployment insurance will be automatically and accurately handled
- Tax Filings – automatically process and file your federal forms 941, 940, and W2s as well as various state reports.
- Precise Costing Data – You’ll get better clarity on specific payroll costs associated with jobs, projects, departments or locations.
- Penalties & Interest – You’ll be sheltered from many penalties and interest associated with mistakes or system issues should this ever occur. It’s rare, but there is definitely comfort in the knowledge that you have professionals on your team and in your corner.
- Forms of Payment & Delivery – There are many options to utilize: Direct Deposit, Pay Cards, Checks – each option can be delivered “green”, or by snail mail or bonded courier
- Integration – The service can be integrated with your accounting software, time and billing tools, and more.
- Bank Reconciliations – Using a payroll service will often make reconciling your bank statements much easier, particularly if the service is taking out all of the payroll and tax funds at once.
- Contingency Planning – If something happens to your payroll person, most small companies have no contingency plan. By utilizing a professional payroll service, anyone on your team (with appropriate rights) can easily submit payroll, and the service will be there to help should the need arise. If your payroll person goes on vacation, the payroll can be entered from anywhere in the world via our cloud based interface, or can be entered in advance.
- Owner Pay– Use the service for Owner/Shareholder/Member/Partner Draws/pay. This can be a huge benefit for owners because most of them don’t pay themselves consistently or in regular intervals. Even have us take out taxes to limit the hassles of filing quarterlies for the owner.
- Automated Calculations – You can set-up automated employee loan payback schedules, garnishments, and more.
- Other Resources – Examples include HR tools and free employment guides and legal advice from licensed attorneys