Which Payroll Solution is Right for Your Business?
Thinking about your payroll service? As a business owner, you shouldn’t have to; that is, of course, if you’ve selected the right payroll solution for your business. Here’s a quick primer on the different solutions to consider.
No matter the number of employees, the payroll function of a business is often much more arduous and costly than it needs to be, especially when the business is growing. With so much at stake, including legal, tax and regulatory issues, employee morale, cash flow considerations – not to mention overhead costs – it is critically important for businesses to find the most effective and efficient payroll solution for their current and anticipated needs.
A small business with just a few employees could get by fairly easily with a manual payroll system consisting of a spreadsheet and a calculator. To make things easier, there are free online payroll calculators that will compute pay, tax withholding and benefit plan deductions.
- Lowest cost
- High degree of control
- Can be work intensive and time consuming
- Greater possibility of errors
- Reporting and deposits must be done manually
Payroll Software Systems
Businesses with multiple tiers of employees – exempt, non-exempt, independent contractors, full-time, part-time – need the sophistication and automation of a software system that can calculate different pay structures and automatically compile reporting data.
- Business maintains control
- Once system is set up, minimal inputs and quick calculations
- Enhanced versions can complete and file tax and reporting forms
- Can be integrated with accounting software, eliminating double entry
- Reasonable cost; typically a monthly service fee
- Software learning curve
- Still requires manual deposits
- Some versions still require manual reporting and filing of tax forms
If your business is ready to hire an accountant, some also provide payroll services. Of course, it will increase your accountancy fees; however, it will ensure your payroll is done right and on time.
- No internal staffing needed (cost savings)
- Expert tax help
- Error-free Guarantee
- Give up control of payroll
- Higher cost
Full Service Payroll
For fast growing businesses, a third party payroll service provider can take on all payroll responsibilities with the capacity to adjust the service level to accommodate employee growth.
- Personal representative managing the relationship
- Error-free guarantee; tax penalties covered
- Cloud-based system allows for direct access by business (retain some control)
- Deposits, reporting, and filing handled by the provider
- Saves the most time
- Slightly higher cost; typically monthly service fee
Most business owners never imagined themselves actually managing payrolls; however, regardless of its size or the number of employees, all businesses are subject to the same reporting and filing requirements; and the same calculations need to be done each pay period. And, the same penalties apply for errors or deadline breaches.
The moment the payroll function begins to impede on the operational efficiency and bottom line of the business, is when the business owner needs to consider upgrading its payroll process. Better yet, business owners need to anticipate their payroll management needs and consider solutions that can evolve along with the business.