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What is a Payroll service and should my small business use one?
Home » Small Business » Small Business Payroll » What is a Payroll service and should my small business use one?A payroll service is a company that, for an average of around three dollars per employee check, does payroll for your business. Outsourcing requires only a small amount of input from you and takes the majority of payroll responsibilities off your plate.
At its most basic level, all you need to give payroll services are the pay rates, hours, and deductions of your employees, as well as instructions on company procedure such as pay period and the preferred check delivery method. If you have hourly employees, you will need to report to your payroll service (via telephone or the internet) the hours worked by each employee. Keep copies of employee forms, but let the payroll service do everything else.
With the given information, the payroll service will calculate, print, and deliver checks. In addition, it will provide periodic summaries to you of payments and deductions made on each employee’s check. Many payroll services now also offer additional services such as automatic check signing, direct deposit, the ability to update employee records via the internet, and tie-ins with 401(k) programs.
Obviously, the biggest advantage to utilizing a payroll service is the saved time and energy. You can now spend your time on what your small business does best instead of on payroll. In addition, payroll services will, in all likelihood, do a better job of payroll than you would because they specialize in it. The IRS reports that forty percent of small businesses that do their own payroll are fined (an average of $845 per fine) for inaccurate returns. Payroll services stay on top of current tax codes, so you don’t have to.
Payroll services are a great help to some small businesses, while others don’t need them. If your small business has virtually no experience in payroll or your employees have complex deductions, it might be worth the expense. On the other hand, if your small business has very few employees or employees with only straightforward deductions, you could probably do it yourself. Do a simple cost-benefit analysis, and decide what is best for your small business.
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