It should not come as a big surprise that small business owners have much to do on a daily basis.
With that being the case, removing the responsibility of monthly payroll duties can save an owner both time and money over the long haul.
The big question oftentimes is not only can I handle payroll, but also health benefits, retirement plans, workers comp and more in-house? If not, should I trust someone else and outsource it?
For small business owners, their payroll responsibilities can include providing paychecks, filing quarterly reports, withholding employee taxes, issuing W-2’s at year’s end, overseeing state disability and unemployment needs, and paying withholdings to various government agencies.
Recommended for YouWebcast: The Art of Growth Hacking: Gaining Early Traction by Doing Things that Don't Scale
If you are thinking about outsourcing your payroll processing needs, consider the following:
* What to look for – Look at a number of payroll provider services so you have a good number of choices. Make sure they are experienced, offer stellar customer service (meaning they are available on your schedule and not the other way around), do not hit you with a pile of add-on charges, and maintain a high level of security when handling sensitive employee financial information;
* Tax payment service – You want a payroll provider who is up to speed on tax laws, especially given the fact that they would need to handle a number of tax issues for you, including federal, state and sometimes local. Finding a provider offering an automatic, electronic tax payment vehicle is best. By doing so, the service determines, deposits, and files your payroll taxes;
* Direct Deposit – Not only do many workers prefer direct deposit, meaning they do not have to go to their bank with a check, but using this form of payment can save your small business money over time. You’re not only freed up from the excessive paper that checks involve, but you also stand less chance of making human errors on the checks. Direct deposit also allows the person handling your human resources duties to not have to deal with payroll issues concerning checks and more;
* 401(k) options – As more and more employees express concerns over their future retirement needs, it is important if you outsource to a payroll provider that they get all the issues involving retirement. Look for a provider that handles retirement plan needs, along with employee benefits. Such items here would include group health insurance, 401 (k) options, workers comp, and flexible spending accounts. With health insurance a major topic in many companies these days, it is not uncommon for job applicants to look around for employers that best meet such needs. As a result, having your benefits properly maintained can give you a leg up on the competition when it comes to hiring the best of the best;
* Monitor the numbers – Should you choose to outsource your payroll and benefit needs, by all means do not wash your hands of them. Especially when first working with a payroll outsourcing provider, make sure you oversee what they are doing, making sure everything is being done properly and efficiently. As the employer, you bear the ultimate responsibility (see below) that all employees receive their payments, taxes are properly withheld, and health insurance and retirement plans are available when necessary;
* Know the cost of mistakes – Last but not least, one of the main reasons you need to maintain watch and control over your payroll needs even when outsourced is the potential for mistakes, especially when it comes to taxes. In the event the company you hired to do your payroll is not doing it properly, you stand to suffer the financial consequences from the IRS. As part of the Employment Tax Research Project (ETRP) unveiled two years ago, the IRS looks at the payroll practice of thousands of employers, focused specifically on worker miss-classification, fringe benefits, compensation for executives and payroll taxes. With the IRS expanding its audit scope, just a few mistakes could result in a substantial financial penalty.
Photo credit: money.howstuffworks.com