All businesses need a solid payroll solution, whether from a payroll service provider or by just using payroll software. Even the smallest businesses benefit by automating and eliminating the hassles and tedium that come with payroll. It’s a never-ending process! But what is the best payroll solution? Don’t get confused between payroll software and a payroll service provider. Companies need to assess their own unique needs and choose the right payroll solution for their own situation.
ROBUST CAPABILITY TO STORE DATA
Payroll software stores all the information on workers and company pay rates plus supporting pay data and then uses that information to calculate worker pay and payroll taxes, to create the payroll checks, and to create records for the business’s accounting system and permanent files. A tremendous amount of information is required to handle payroll properly – names, addresses, social security numbers, federal and state tax withholding choices (sometimes local tax withholding choices), hire dates, termination dates, types of pay (hourly, salary, commission, tips, part-time, full-time), and the list goes on.
MOST AUTOMATICALLY UPDATE FOR TAX CHANGES
For accurate calculations, the payroll software must always be up to date with federal, state, and local payroll tax rates or tables. Luckily, most payroll software programs automatically update withholding rates since these can and do change regularly. However, you are responsible for monitoring and updating federal and state unemployment tax rates for your business, since each business’s rate is government assigned and depends on industry, past activity, and other factors.
Setting up all these details is hugely time-consuming and potentially risky if you are unsure of the correct data to input. Plus, maintaining the details is a never-ending task and is also extremely time-consuming. Employees may be regularly joining or leaving the business, changing job assignments or being promoted, or encountering family changes – and each of these situations entails more time for updating records. And that’s not even considering the regular activities of paying the employees or handling the taxes properly.
KEY TAKEAWAYS FOR PAYROLL SOFTWARE
- Payroll software is very robust and complex, due to the huge amounts of data it must store and maintain.
- You must be confident your payroll software is always up to date since taxes and government regulations change regularly.
- Maintaining accurate information on employees and business operations is extremely time-consuming.
YOU INITIATE AND COMPLETE
Even if the payroll software contains complete and accurate information, the business must still initiate all the payroll processes on a defined, rigid, and ongoing schedule. The payroll process covers calculating the pay and taxes, initiating the wages to employees (whether printing checks or providing direct deposit), making tax deposits to all the proper government agencies at the correct time, filing the payroll taxes to the proper government departments, and updating the business accounting records.
MAINTAIN YOUR OWN EMPLOYEE RECORDS AND CHANGES
Payroll software is invaluable for keeping all the information and performing necessary calculations. But, someone (or several people) must maintain the records, process the payroll, make sure the pay gets to the employees in the manner designated, deposit the taxes, and file the tax forms to each government agency. It is extremely worthwhile to think about the level of responsibility you are willing to assume versus the level of service you can rely on from the payroll software company.
Many business owners try to manage their payroll themselves, or have a current employee assume the added responsibilities for payroll. However, this approach is almost never cost effective. It increases labor costs, prevents the designated employee from handling more profitable activities, and makes it difficult for the business to pursue growth opportunities. Also, this approach can increase the risk that your business incurs penalties, since handling payroll in a compliant manner requires specialized knowledge.
KEY TAKEAWAYS FOR PAYROLL PROCESSING
- The business is responsible for using the payroll software correctly and to execute all payroll tasks and processes within business and government deadlines.
- The business must have the staff with specialized payroll knowledge and sufficient time to handle all the payroll responsibilities.
- The business owner should never handle the payroll because it prevents the owner from focusing on business growth and profits.
HIGHER LEVELS OF SERVICE AVAILABLE FOR ADDITIONAL FEES
Payroll software products such as Intuit Quickbooks, Gusto, Sage, and many others are standalone programs. You set up, maintain, and run these software programs yourself. You also handle the payroll depositing and tax filing. If you want help with processing payroll deposits and tax filings, those services are available for an additional fee. However, you are still responsible for generating and maintaining accurate and complete information on your own.
ADP and Paychex are the largest payroll software companies and will also handle the payroll processing, depositing and tax filing automatically. These huge companies have the people and resources necessary to stay abreast of changes in government compliance and tax law. You can be confident that your software will stay up to date and that your payroll tax deposits and filings will process on time.
ON-LINE SUPPORT IS THE NORM
However, finding the right information at the right time can be frustratingly time-consuming. All these payroll software companies provide customer service via 800-numbers, blogs, newsletters, and many online resource articles. In addition, you can usually find information in on-line forums or discussion boards. Online research can take hours and often the information you source is “close” to answering the question you have, rather than “exactly” solving for your particular situation.
Working with someone over an 800 number may or may not be easier or faster. Wait times on hold or for a call back can be lengthy and are never predictable. Plus, telephone customer service jobs are usually held by more junior personnel who are still developing solid general business experience. Although they may be very knowledgeable about the features and functions of their own company’s software product, they may not fully understand how your business needs to use it specifically. Furthermore, a more junior customer service rep may lack the strong ability to ask business or operational questions so that the software may be set up precisely to run the way you want your business and payroll process to run. This can result in sub-optimal operations wherein your business needs to adapt to the software and the service, rather than the other way around.
Also, many companies’ have evolved their customer service into an automated process that may or may not work smoothly. You are tasked with explaining your question or issue through on-line chat or filling out a service ticket and waiting for an email response. It can be very difficult to get to what feels like “a real person”. Furthermore, it’s time consuming and challenging to explain complex problems over an email, and oftentimes the recipient interprets the content differently. This approach is inefficient and may not solve the issue, or it requires much back and forth communications.
KEY TAKEAWAYS FOR PAYROLL SERVICE
- Most payroll companies offer service via 800-numbers, blogs, newsletters, and many online resource articles.
- This level of support is only sufficient if you have the skill and perseverance for independent online research plus enough time to handle the investigation.
- It can be challenging (or not possible) to find and talk with a highly knowledgeable support person when you have complicated questions or are facing difficult issues.
- Higher level support may be available for additional fees.
FULL-SERVICE PAYROLL PROVIDER
EXPERT PAYROLL AND COMPLIANCE KNOWLEDGE
A full-service payroll provider combines expert payroll and tax compliance knowledge with the payroll software and the entire payroll process. The best payroll service providers are willing and able to handle all the time-consuming tasks of payroll (including inputs and changes) and are flexible to adopt methods and operations to handle payroll in the specific manner that your company needs. In a sense, the payroll service provider becomes like a department of your own company. The full-service payroll provider sets up the payroll software to reflect your business, handles the ongoing payroll processing and employee pays, makes the tax deposits, does the payroll tax filings, and maintains all the changes that your business experiences. Using this kind of payroll service provider reduces costs significantly since you don’t need to hire an employee (or a few employees) and your business eliminates the risk for penalties.
SAVE MONEY AND AVOID EXPENSIVE PAYROLL MISTAKES
In fact, studies show that businesses spend an additional $18,800 annually when current staff must take on the extra responsibilities for payroll and HR. This expense is increased if you must hire additional employees. Also, the IRS estimates that 40% of small to medium-sized businesses pay a payroll penalty each year for missed deposits, filings, and mistakes.
ACCESSIBLE AND ADAPTABLE
Most importantly, a full-service payroll provider will be more accessible via direct phone calls and ongoing communications. They are typically smaller companies that can quickly adapt to your business’s particular needs and are usually run by payroll people with many years of experience. The best payroll service providers take on the responsibility for all the payroll-related tasks. This frees you up to focus on the important issues in your business – analyzing your financial reports, strategizing for opportunities, and making decisions that impact your business profitability.
KEY TAKEAWAYS FOR A FULL-SERVICE PAYROLL PROVIDER
- Full-service payroll providers protect your business from incurring compliance penalties, plus save your business significant money in labor costs since you don’t need to hire or re-purpose staff.
- Full-service payroll providers can unburden you from all the input and time-consuming tasks of payroll processing, tax depositing, and tax filing.
- Full-service payroll providers can adapt procedures to match your business needs.
- Offer services at a competitive rate.
WHAT’S THE BEST PAYROLL SOLUTION?
Since most if not all businesses must and will use payroll software, the real question to consider is what level of payroll service will work best for your company. Does your company have the time, staff, and knowledge to handle the payroll function correctly and independently? Does your company have dedicated staff to handle inputs and work with online and 800-number customer service options whenever necessary, but you’d like help with processing employee pay, tax deposits and tax filings? Or would it be easiest and most productive for your business to work with a full-service payroll provider to handle inputs as needed, employee and business policy changes, compliance issues as well as the payroll processing, tax depositing and filings?
If you have an employee with sufficient payroll, employment practice, and government compliance knowledge, then a payroll software program may be sufficient. This approach also assumes that the person with the payroll knowledge also possesses enough technical skill to set up and navigate the software independently. The employee handling payroll will also need to have the time to research solutions and answers to questions on their own, plus have patience and skill in working with customer service reps on the phone and doing online research. It’s safe to say that the business owner or president (in small companies) should never be this person, as the ongoing tasks related to the payroll function prevent the time necessary to focus on revenue, profitability, or growth initiatives for the company.
Don’t assume that handling payroll with current or added staff on your own is the least expensive choice, even when utilizing the customer service options of the large payroll service companies. A smaller, full- service payroll provider will most likely be just as cost effective (or perhaps less expensive) than the other options. And because these companies have dedicated their livelihoods to payroll, they are experts in the field.
When you’re ready to look for the right payroll solution for your business, it’s not enough to only consider the features of the software program. Instead, be sure to thoroughly investigate the customer service that each company can provide to you. Then compare that service to the true capabilities your business has to devote to ongoing payroll responsibilities and issues.