If you are starting your own business, and hiring employees or contractors, you may be tempted to do the payroll yourself. There are plenty of software packages, and other tools, to help you do the job yourself, but here are five reasons why you might be better off hiring a payroll company.
Cost. Even if you’re a small business, with fewer than 20 employees or contractors, you can still save money by outsourcing your payroll. It may not seems so at first, but if you add up the amount of money you spend on printing and distributing checks alone, it could add up to more than you would spend to have a payroll company do it for you. Even if you don’t distribute checks, and pay through PayPal or a similar service, you still have to generate payments, keep track of invoices, and distribute tax documents at the end of the year. If you add up how much it costs you in time, materials, and supplies to handle your own payroll, a payroll service could be a money-saving proposition.
Save yourself the paperwork,
Productivity. If you are the head of your own company, chances are that you wear a lot of hats. Hiring a payroll company can relieve you of one of your many duties, making it easier for you to focus on other aspects of your business. Why spend hours in front of the computer, on pay day, when you could be out growing your business?
Tax and Legal Issues. When you start doing payroll, you take on a lot of tax liability, not just on the federal level, but the state level as well. Doing your payroll wrong could result in you paying a lot of money in tax penalties. For example, approximately 40 percent of small businesses end up paying a penalty to the IRS for filing their payroll taxes improperly. In 2014, that resulted in $4.5 billion in penalties.
When you hire a payroll company, they are responsible for all of the federal and state tax issues. With their years of experience, and the use of dedicated teams, they will be more likely to make sure all taxes are files properly, and on time, and they guarantee their work. In fact, a payroll company (eg. ADP.com) can even save you money by finding you tax credits and incentives.
Payroll companies are especially useful to companies that have workers spread across the country, because payroll regulations vary by state. The payroll company stays on top of things, so that you don’t have to.
Reliability. Your workforce relies on getting paid accurately, and in a timely manner; it reinforces their trust in you and your company. In fact, reliable compensation is as important as communication in fostering trust among your workforce. Payroll delays also cause morale problems; and low morale can negatively affect worker productivity and your bottom line.
A payroll company ensures reliable payments because you have a whole team of people doing your payroll, instead of just one or two individuals. That way, if any one person is out, it won’t disrupt the whole process. Your payroll gets done, your people get paid, and everyone is happy.
Join the 21st century
Better Payment Options. This goes along with reliability and workforce morale.When you do your own payroll, you may have two options for paying your people: writing a check or paying through a service like PayPal. While both methods are fine, they are not without limitations. Some banks make people wait several days for checks to clear, and companies like PayPal could suddenly refuse certain transactions.
Payroll companies give you the option to direct deposit funds directly into a checking or savings account, or by loading funds onto a prepaid debit card, and you are less likely to experience transaction issues.
Ultimately, the decision on how you pay your people is entirely up to you. If you have fewer than 10 people in your workforce, you could be fine handling the payroll yourself. However, if you have more than 15, or you foresee growth in your future, you would do well to consider a payroll company. You’ll have more time to focus on more important things, you’ll stay on top of your payroll taxes, your workforce will be happier, and you’ll save money in the long run.
