Processing payroll involves calculating each employee’s pay based on hourly or salary rates, calculating Social Security, Medicare, local, state, and federal withholding taxes, and other deductions. Keeping balance sheets, certain records, and reports are also vital for tax filing.
While all this sounds straightforward enough, tax laws are complex and ever-changing, and other related payroll activities can be quite detailed. For these reasons and others, business owners are increasingly looking to outside payroll companies to handle many of these functions.
Depending on the payroll service company, a variety of service options are available to business owners.
Types of Service Options Offered
The types of service options that you can expect a payroll company to offer include:
- Calculations of each employee’s pay and tax deductions;
- Contractor (1099 employee) payment;
- Employee payment through
- Direct deposit
- Paycheck printing and delivery
- Pay debit cards;
- Quarterly local, state, and federal payroll tax return filing;
- Issuance of annual local, state, and federal W-2 and W-9 forms;
- Quarterly tax deposits made with local and state tax authorities, the IRS, and the Social Security Administration;
- Addressing payroll and tax requirements for employees living or working in multiple states;
- Tracking 401(k), section 125, or retirement plan contributions;
- Tracking vacation and sick day payments;
- Payroll integration with other computer programs, such as QuickBooks, HR software, time clock, and more;
- Making payments from a business’s funds provided but issued through the payroll service’s bank account.
Many payroll companies also provide comprehensive management services for benefit administration, workers compensation, and retirement services. They may also assist with managing expenses, tax preparation, and tax compliance. In general, payroll service companies assume liability for penalties and fines if they fail to deposit tax payments or file tax information promptly. That monitoring service alone can save companies considerable expense.
Processing Fees
Some payroll companies charge individually for specific services along with charging per employee and/or check issued. Others provide all-inclusive package prices. When selecting a payroll service, it’s important to clarify what services the company provides and how it charges for them.
Technological Advantages
Today’s technological advancements allow payroll service companies to offer communication via e-mail and web portal interfaces. You can use these to enter data for processing, make changes to employee or company profiles, or view data and reporting. Clients can update personnel file information and share it with payroll services so accurate records are efficiently and cost-effectively at hand. Electronic tax filing handles tax returns instantaneously, saving mailing costs and time.
Through communication technologies, payroll service representatives can be responsive and quickly deal with concerns as they arise. Dealing with critical issues, implementing changes, or meeting deadlines occurs rapidly. If needed, multiple parties can iron out matters through a conference call, even if they’re located on opposite sides of the country.
Questions to Ask
When selecting a payroll service, ask questions that help you evaluate whether the service is a fit for your needs. Questions to ask include:
- What pricing do you offer, and are any service prices negotiable?
- Does your price vary based on the number of employees and/or number of pay runs? What other variables impact pricing?
- What kind of customer support is available (including hours and channels)?
- What pay options do employees have for payroll?
- What tax compliance services do you offer?
- How do you notify customers about tax compliance or needed information?
- Do you assume responsibility for penalties and fines incurred if you are late making deposits or filing payroll tax forms?
- What references can you provide from customers who are using your services?
- What type of guarantee do you provide?
A payroll service can free up time so business owners and managers are better able to focus on serving their customers and growing their business. It just might prove to be the most cost-effective business solution.
Published: December 18, 2012
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