Take the pain out of payroll processing

Outsourcing could save you time, headaches, and penalties.

by Michael Alter   Wouldn’t it be great if you could get someone else to pay your employees for you? Talk about boosting your bottom line. Short of that unlikely scenario, perhaps the next best thing is to hire a company to take payroll processing off your hands. Even if your firm has just a few employees, there are numerous regulations and withholding tables to keep track of, and just when you think you understand them, they change. It’s a small miracle if you get everything right.

Make a mistake on payroll and your employees lose faith in you–unless you overpay them, in which case you may never find out about your error. Adding insult to injury, if payroll is wrong or filings are late, the Internal Revenue Service will soon be knocking on your door with a penalty notice. Indeed, the IRS indicates that 40% of small businesses are fined for payroll errors each year for an average fine of $845.

If you’re feeling some payroll pain, it’s time to take a look at outsourcing.

What’s new in outsourced payroll?

The nation’s payroll services have undergone a major transformation in recent times. New outsourced payroll solutions can save time and money. More importantly, they let you stay in control throughout the process.

Historically, outsourcing payroll meant you needed to call in payroll on a predetermined day and time. Business owners had to duck out of important meetings and otherwise interrupt their schedules to make this call.

Some payroll providers offered software solutions, allowing data to be entered locally and sent in via modem. While this represented a step forward in terms of convenience and control, the software was complex, designed to handle the payroll needs of large corporations rather than the simple needs of small businesses.

Payroll services can now overcome these deficiencies by offering simple Web-based interfaces. All you need is a Web browser and an Internet connection. You decide when and where you want to process payroll. You control the process instead of vice versa. Once you enter your payroll data, the service automatically calculates, deducts, pays, and files all taxes.

Since you enter the data yourself and view the results in real time, you don’t have to worry about a data entry clerk making errors when you give information on the phone. The odds of an incorrect check or direct deposit amount are substantially reduced.

What can you expect from a payroll provider?

Payroll services calculate payroll and withholding obligations. They process the checks or provide direct deposits into your employees’ accounts. They take care of all the government filings with federal, state, and local tax-collection agencies and issue W-2s for you. They also will provide you with management reports that let you track and monitor your payroll.

Choosing a provider

Once you’ve determined that outsourcing payroll is an attractive alternative to in-house processing, the trick is to choose the payroll service that’s right for you.

First and foremost, make sure you like the way you’ll be processing payroll. If you’re frequently on the road or like to do payroll whenever you choose, you may want to choose a provider that offers a Web-based service. If you prefer to give your information to a customer service rep, choose a provider that offers a call-in service.

Make sure your payroll service can address your unique needs. Most services will handle basic requests–like if you have to pay payroll taxes for multiple states. But if you have complex needs, you will have to find a provider that can handle your requirements.

Be sure to understand all the costs up front. Occasionally, additional charges will add up to make what initially seemed like a good price not so attractive after all. And if you priced payroll services in the past and found them too expensive, you might be surprised by today’s costs. Because online payroll services have lower infrastructure costs, many are passing on those savings to small businesses. Assuming you have five employees paid bi-weekly, you might expect to pay anywhere from $50-$120 per month, depending on the services you require and the company you hire. Charges for each additional employee are typically small. Many providers serve clients with as few as one employee.

If you choose the right provider, you’ll be happy and spend your time on more productive aspects of your business. If you try to put a square peg into a round hole, you’ll find you’ve traded one kind of headache for another. Take the time to talk to providers and make sure that what they offer works for you.

Michael Alter is a senior vice president at SurePayroll (SurePayroll.com). His company offers a Web-based payroll service designed exclusively for small businesses.

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