Managing payroll for your employees can be a major task. Whether you have five or 5,000 employees, there are many steps that go into getting your employees the most important part of their role with you, their paycheck. For companies of all sizes, making decisions to outsource certain functions of the business can be tough. Arguably one of the most difficult decisions to make is whether or not to outsource payroll.
CEOs of small businesses often times try to manage their payroll in the early days to save money, but they end up spending double the amount of time doing something they do not enjoy or fully understand. The pressure of payroll processing, payroll tax filings, tracking paid time off and completing and distributing W-2s each year can be overwhelming. There are many steps involved in running payroll for your company, and there are numerous benefits of payroll outsourcing.
The following is a high-level overview of the payroll process. If you are a business leader who has thought about outsourcing this area of your work, explore the options below to see if partnering with an outsourced payroll provider will make sense for your situation.
- Calculating wages
- Deducting taxes
- Printing and distributing checks
- Signing checks
- Setting up direct deposit
- Pretax deductions such as health care and 401(k)s
- Distributing W-2s in January
Taxes and Deductions
- Tax deductions for full- or part-time employees vary by state.
- Then there are federally mandated taxes for Social Security and Medicare, with the amount dictated by a worker’s salary and number of dependents.
- Other deductions that you may have to consider are those for health care and savings programs such as a 401(k)s.
Keeping the Business Cash Friendly
It’s also very important to know how much cash you have on hand for your business. Someone must manage your books and know that you have enough cash on hand to meet payroll. A professional managing your payroll and accounting efforts will help you keep the cash you need as it will be their job to collect on invoices, especially those that are past due. Learn more about our outsourced payroll services.
Time is Money
For those who process payroll, you know it can be quite tedious. Time spent calculating payroll or taxes, printing paychecks, submitting direct deposits, and reviewing reports is time away from running the business. If you are using your company’s resources to complete your payroll in-house, you are likely putting more on your employees’ plates that may already be full, and you are possibly impacting your budget in a negative way.
Obviously, payroll is vital to a company’s success, but it’s not a revenue-producing function of your business. Consider how long it takes for your HR employee (or team) to process payroll each pay period. If payroll is not the sole purpose of that person or team’s job, are there more important areas of business that are now lacking because they have to focus on payroll? Quantify, in dollars, the time it takes, and compare it to the cost and value you may receive from someone else handling payroll for you.
Errors & Stress Reduction
The current workforce has become more mobile than ever. You’ll also notice an increase in the number of companies operating in various states. With multi-state operations, you open your business up to a new set of nightmares, including complex payroll taxes!
You might fully understand the payroll situation in one state, but what if you grow into new states this year? Is your team equipped to learn new regulations in different states while also fulfilling the other duties of their roles? How many extra hours will go into learning new area regulations? Furthermore, how will these factors affect your employees’ stress levels, which can negatively impact their work-life balance?
Outsourcing your payroll functions to the right third party will ensure that your employees receive correct pay that is in compliance with all regulations and statutes, also saving energy when learning new laws.
Change is Constant
Payroll needs can change dramatically over a short period of time. From hourly workers who are clocking in and out to employees who have had a qualifying event and need to change their benefit elections, the only constant is change. Furthermore, if your business is in growth mode, you also must deal with getting new employees set up through your onboarding process. With the ever-changing world of payroll, why not leave it up to the experts?
Like most things in life, it’s worth noting that not all payroll providers are created equal. When going through your vetting process, decide what’s important to you, for example:
- Is the provider local?
- Does the provider designate a payroll processor to my company?
- What is the provider’s fee structure? Do they charge a flat fee for all payroll/payroll tax services, or do they charge a percentage of gross payroll?
- Does the provider have experience in the states in which I operate?
The right payroll provider can handle all of the above for you so that you can focus on running and expanding your business. Contact us today to learn how LBMC Employment Partners can help!