The Value of Payroll Services
Hiring a service to calculate and print paychecks can offload salary, taxes, HR and many other headaches.
With the economy as volatile as it is, you may not be thinking about outsourcing more services. Instead, you want to keep your current staff as busy as possible and avoid additional expenses. The idea of outsourcing payroll services may seem extravagant. After all, how hard is it to tally hours, do some math to determine taxes, and write the checks? But those who have handled payroll for any length of time know it's more complicated and time consuming than it seems.
Hiring a payroll service is no different from outsourcing a task like bookkeeping or janitorial work. You could do it yourself, but giving it to a third party allows you to focus on your core business activity. That's why an increasing number of businesses have offloaded this activity and everything associated with it, from compliance (i.e., proper payment of taxes) to human resources (i.e., new hire reporting and benefits). The following are a few reasons you may want to consider outsourcing to a payroll service provider.
Save time
Beyond just the time saved calculating payroll on a weekly, bi-weekly or monthly basis, payroll vendors can also help with a variety of issues that most businesses might be unfamiliar with. For instance, you may hire a sales representative in another state, which means you will have to abide by different regulations regarding payroll tax calculations for both state and local taxes. A payroll services provider will handle all of your payroll tax calculations, payments, and reporting obligations seamlessly, regardless of geography.
Or, a discharged employee may challenge whether they were fired or laid off, and it can take days to compile the background documentation required to settle the dispute. You may even receive an unemployment claim from someone who never worked for you. The ultimate determination has financial ramifications on your business. Rather than have an employee stop their regular duties to investigate these issues, it's easier to have your payroll service provide the necessary documentation to address the claims.
Calculate payroll taxes
If your employees reside in multiple jurisdictions, or if you use contractors, you need to manage calculating federal, state, and local employment taxes, and file payroll-related tax paperwork.
If these calculations are done incorrectly, you may be hit with interest penalties on money owed, based on the length of time that has passed since the error occurred. One payroll services provider estimates that as many as one-third of all small to midsize businesses are penalized, with each penalty costing at least $800 each year, and compliance penalties are only increasing. By outsourcing this function to a third party, your numbers are backed by their experts and their experience. In most cases, you'll even receive a guarantee against IRS fines.
Other employment services
Increasingly, payroll services are offering additional employment-related services. These include:
- Conducting job applicant screening and background checks
- Providing government-issued posters regarding labor laws and minimum wage rates
- Calculating and distributing payroll contributions to retirement accounts
- Providing payroll trending reports and analysis
Save money
If you want to determine the cost justification of an outsourced payroll service, ask your bookkeeper or accounting staff to keep a record of how much time they spend calculating payroll and tracking down the answers to other payroll- and employment-related questions. Compare their hourly wages or salaries to the cost of outsourcing to a payroll services provider. The cost for these services can vary based on number of employees, frequency of payrolls and whether you choose an online provider versus a more traditional local payroll provider.
Union Bank works with three of the leading payroll service providers: ADP, Paychex, and Business Online Payroll. If you would like to learn more about payroll services for your business, stop by a Union Bank branch or go to www.unionbank.com/payroll.
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