I grew up on a Wisconsin dairy farm, and in the summer, neighborhood kids would often be hired to help put up the hay the cows would eat all winter. My mom’s payroll system back then was simple. It consisted of a spiral-bound notebook and her purse. She wrote down the names and hours in the notebook and then handed out the dollar bills as the workers sipped lemonade under a tree at the end of the day. I’ll bet you’d laugh if I said your payroll system could be even simpler than that … but it can. If you switch from doing payroll inhouse to using a payroll service, the hours you put into it could be reduced to a phone call or a couple of mouse clicks. Now I know what you are thinking … why pay some other company to do something you are capable of doing yourself? Wouldn’t that be a waste of money? Surprisingly, a payroll service can save money, as well as time, and help you sleep at night by guaranteeing payroll is accurate and that all tax rules and government regulations are followed.
HOW MUCH DOES IT COST?
One of the larger, better-known payroll companies out there charges about $3 per check. So, if you’ve got 15 people getting paid twice a month, that comes to just over $1,000 a year. This includes processing and preparation of paychecks, automatic deposit and reporting of employment taxes and creation of management and accounting reports. Other companies I looked into came in slightly more or less than that for the same service. Costs can add up, however, when you add services, which might include direct deposit of paychecks, electronic signing of paychecks, paycheck delivery and any special reports. If you’re not sure you can afford to outsource your payroll, compare it to your cost for internal payroll processing, which includes time spent updating payroll records, calculating taxes, filing tax payment and printing checks. Then decide what that time is worth to you. Could that time be better spent in building your business?
WHAT ARE THE BENEFITS?
Outsourcing the preparation of payroll has several key benefits for your company: - It saves time. A company with 10 or 15 employees might require four or five hours of accounting time internally to meet the payroll each month. Wouldn’t it be nice to simply dial a number and tell someone the hours, deductions and salary amounts of your employees, or better yet say, “same as last time,” and be done with it? - Total compliance. According to the Internal Revenue Service, the average small business has to comply with more than 50 payroll tax regulations at all levels of government - and they are changing all the time. A payroll company will keep up with government regulations, and unless you report data to them incorrectly, almost any good payroll service will protect you from government penalties that result from an error or missed deadline. That’s a big deal, since the IRS has penalized nearly 40 percent of small business owners at one time or another for late or inaccurate payroll tax filings, with the average penalty being $845. Eliminate that penalty and you’ve saved almost enough to pay a payroll service for a year. - Professionalism. If you are constantly making payroll mistakes, and your attitude about processing employee paychecks is one of disdain, how does that make you look in the eyes of your employees? Are you telling them that you don’t really care about how hard they work with paychecks that are inaccurate, late or at the very least the cause for your really bad mood every two weeks? Outsourcing sends the message that you want to be sure they are rewarded accurately, promptly and professionally for their work. The only downside, aside from the outof- pocket expense - which in the long run will probably not be a downside - is a slight loss of control. Payroll companies have the expertise and experience to know what systems and schedules work best for them, and you may have to change some of your systems and schedules to work with them. There is, however, an option for a business owner who wants to simplify payroll and maintain a little more control - online payroll processing. This usually costs less than outsourcing, but requires more work on your part. It can streamline your process, however. Some of the big payroll services like Paychex Inc. have online payroll options. Other online payroll services include Paycyle and SurePayroll. As technology advances, both online and traditional payroll services can tie into the business accounting software of more and more companies, streamlining things even further.
WHERE TO GO FOR HELP
There are many reliable payroll services, both large and small. Some of the major players you may have heard of include ADP, Paychex and SuperPayroll. You can check the Yellow Pages for local services, and for a broader search, type “payroll services” and maybe the name of your city or state into a search engine. Study their Web sites or call a customer service person from a few companies and find out if they provide the services you are looking for. They will all do the basics, but some offer a wider variety of optional services. Not all payroll companies handle city and local taxes or companies with locations in multiple states, so if you need these services, make sure the company can provide them. To make the search easier, before you call, put together a list of what you have (type of business, number of employees, pay period, accounting software, computer system, etc.). Also list exactly what you are looking for. Make sure the payroll service you select will stand behind you. Ask if they will represent you if they make a mistake and pay any penalties that are assessed. You may want to get references and check them before signing on. In general, look for good customer service. If a payroll company is not responsive before they get your business, they certainly won’t be after. If you’ve started to view payroll as the ugly giant that’s always looming in the office, demanding to be fed every week or two, maybe outsourcing is the way to go. If you enjoy this task, rarely make a mistake and like to impress your friends with your knowledge of employee tax regulations … well, maybe you’re in the wrong business and should start your own payroll service. I’m sure some of your fellow contractors would be happy to hire you.
