Payroll Outsourcing: Taking Your Small Business to the Next Level
What is Payroll Outsourcing?
Depending on the size and circumstance of your company, managing payroll can be quite difficult. Paying your employees what they’re owed in an efficient, timely, and accurate manner is paramount to not only the morale of your employees but the overall success of your company. But there are plenty of reasons why sometimes you might be faced with a hiccup or an obstacle, and you might not have enough funds in time - as can happen with a company’s experiencing rapid employee growth, for instance.
So much goes into accurately managing your payroll that you can accidentally underpay employees, overpay employees, and even run into legal issues if you aren’t careful and compliant with state and federal law. And it can be overwhelming staying on top of it all while also running your company at the same time. This is why outsourcing your payroll management to a company that specializes in payroll services will not only help you proactively ward off any potential payroll disasters, but it will also give you a helping hand in cases where you might find your company short of money.
Paying Your Employees
Payroll is all about paying your employees for hours worked or services provided. It is an agreed-upon contract of a set hourly wage or salary per worker. This contract initiates on an employee’s hire date. It also takes into account any merit increases, bonuses, or any other contingencies affecting the base rate.
Withholding and Paying Taxes
for someone who is not as fluent in payroll tax laws and ordinances, it can be an overwhelming task. Payroll has its own set of rules and caveats that make it more complicated. For example, deductions need to be taken from gross pay, such as federal and state withholding taxes and benefits payments.
Reporting to the Federal (and State) Government
Each new hire is required to fill out a W-4 or W-9 during employee onboarding. This federal form cites their burden to report their wages to the federal government. The state may also have its own wage reporting documents.
Employees select on these forms how much they plan to pay in taxes to meet their taxable burden. The HR department withholds this amount per paycheck, which is reported on each employee’s W-2 during the tax filing season.
The U.S. Internal Revenue Service (IRS) then measures up the annual wages to the employee’s income tax bracket to ensure the tax obligation was met. If employees underpaid their tax burden for the previous calendar year, they will owe taxes. This could result in wage garnishment, which becomes another task for the HR department.
Maintaining Labor Compliance
Business owners and their HR departments have a great duty to comply with the Fair Labor Standards Act (FLSA). The FLSA was founded by the U.S. Department of Labor. This act essentially is the checks and balances for businesses. Its main focus is how fairly workers’ wages are regarding the following:
- Adhering to the federal minimum wage for covered nonexempt workers
- Ensuring overtime pay laws are met for covered nonexempt employees
- Publicly displaying the FLSA requirements at the place of employment
- Protecting minors under child labor laws
- Verifying a prospective candidate’s ability to work legally in the U.S
When do I get help with payroll for my small business?
It’s understandable that many business owners may be experts in every area of their company but payroll management. Unfortunately, poor payroll management comes with inescapable risks of high employee turnover or being audited, and it’s all too common the case with rapidly growing businesses. But you don’t have to wait until things get bad - now is the perfect time to get help with your business’s payroll, now matter how big or small the size of your company.
Payroll SAAS options have experienced rapid growth in the past decade. The global HR and payroll services and software market was once valued at $17.2 billion (U.S.) in 2016. This figure is expected to balloon to $41.6 billion (U.S.) by 2026.
This growth came about when small businesses and enterprises began welcoming help running their companies in the accounting and HR departments. There are more compliance and payroll tax laws in effect today which can be quite confusing. But when you can hire an expert on your business’s behalf, processes run smoothly and your business is much more protected from the typical pitfalls you’d otherwise likely face.
What are the typical problems when processing payroll?
It’s very common to have data-entry errors resulting in incorrect paycheck distribution. This could be anything like these:
- Miscalculating employees’ absenteeism
- Inappropriate PTO application
- Incorrect payroll tax withholding percentages
- Missing benefits deductions
Other common errors that can occur are with setting up direct deposit during employee onboarding.
On a greater scale, though, payroll processing mishaps can cause major issues for a larger workforce if recordkeeping isn’t safe, efficient, and accurate. A business could altogether be using the wrong payroll program. Another complication is system incompatibility with the timeclock or employee self-service (ESS) modules.
What compliance issues do small businesses face?
FLSA mandates apply to federal, state and local entities. If any formal complaints are lodged against a business, those entities reserve the right to inspect the company for any areas of compliance issues. Areas of concern include:
- Clear disregard for minimum wage pay scales
- Not meeting overtime wage requirements (when applicable)
- Abusing child labor protection laws
- Having an illegal workforce
How can small business owners save time?
The biggest advantage of working with an outsourced payroll solutions provider is the amount of time and money small businesses can save, whether you’ve hired an outside company to manage your payroll processing or you’re simply using their SAAS product. It also helps ensure you meet FLSA compliance.
How does payroll affect morale?
When employees are unfairly paid for their time worked, their direct company contributions, turnover, and absenteeism increase. The Society of Human Resource Management (SHRM) shared the results of a study that shows the direct correlation of absenteeism affecting businesses. In summary
“Supervisors spent an average of 4.2 hours a week — or 5.3 weeks a year — dealing with absences, including finding replacements, adjusting workflow and providing training….”
Essentially, it’ll cost your business more in the long run if you don’t immediately pay your employees what they are owed.
How do I save money managing payroll?
It can be less expensive to hire an internal payroll manager, but it also comes with its own risks. They can very well become overwhelmed themselves, especially depending on the quality of their training, which means your company’s payroll is still very much at risk of human error.
Outsourcing to a dedicated Arizona-based payroll solutions program helps decrease the likelihood of mistakes and internal burnout.
How do I set up payroll for my small business?
Setting up payroll for a small business might seem like a simple task, but there are many parts involved, especially in maintaining it while your business is in operation. The process becomes more simplified with the help of a payroll solutions provider. With tutorials and dedicated customer service agents at your fingertips, the setup and ongoing management become more feasible.
What are the alternatives to ADP and Paychex?
ADP and Paychex are no doubt among the most known names in the payroll market. Many other HR solutions providers help with more than payroll setup and ongoing maintenance. Zenefits, Quickbooks, and Paytech are among the rising names in the business.
Why outsource payroll processing software?
It’s becoming more common that even the smallest businesses outsource payroll tasks. Unparalleled security, a drastic reduction in data entry errors, and around-the-clock technical support are the leading benefits of outsourcing payroll, making sure employees are getting paid, and that no company money goes to waste. To complete payroll functions, today’s software uses the best of artificial intelligence and autonomy for efficiency and accuracy.
A third-party payroll service provider can help ensure proper record-keeping for a business’s workforce. Many of them even archive time logs in a secure server or cloud for protection and easy retrieval. Others also offer electronic alerts for managers so they’re aware of employees approaching overtime, as well as other notable metrics.
What are some key features of payroll software?
Payroll software does more than ensure your employees are paid accurately and on time. It helps define your overhead costs and looks for tax credits and expense recoveries. Some even allow time management tracking, 401(k) and insurance offerings, and E-Verify confirmation for hiring new employees.
What are the downsides?
The payroll software market is congested with many providers, options and pricing tiers. You need to find the one that’s best for your business model.
The key thing you should look for from a payroll provider is ease of scalability as your business and workforce grows. Other important points are security features and compatibility with time management and accounting tools.
Should I use a service or software?
You know your business best and can assess when trusting an outside person or tool is the right step for you. A leading benefit to working with an outsourced payroll solutions provider like PayTech is having a dedicated account manager.
This point of contact can help you navigate any areas of concern. They can also provide tips for how to use the latest technology for even quicker results, making having both a dedicated account manager as well as software the best recipe for your business’s success.
How much do outsourced payroll services cost?
It’s impossible to have a one-size-fits-all blanket cost for payroll services. Every business is different and has their own unique needs from a payroll service provider. Questions to consider that may affect any one-time and recurring costs include:
- Is the program or service only meant to supplement existing programs in use (ie. existing time clock modules, existing accounting software, ESS platforms, etc.)?
- Is the expectation that someone else completely owns those processes and eases the pressure on your HR department or yourself?
- Need extra services such as 401(k) offerings, insurance management, or E-Verify abilities?
- Need more than just payroll records stored for easy retrieval?
- How scalable is the service for my business type and workforce if they were to grow?
How much is direct deposit for small businesses?
A small business is most often a business with a workforce of 1-49 employees. In the Paytech pricing packages, direct deposit is included in the custom solution at $95 per month. Other payroll companies for small businesses have different pricing tiers and are subject to other contingencies that vary.
How do I make payroll easier?
Thanks to cutting-edge payroll servicing technology, many business owners are beyond relieved when they have a payroll program which autonomously operates and collects the data necessary for accurate and timely payouts.
The use of ESS modules helps pare down the amount of paper that is necessary. No more wasted paper on time off requests, pay stub copies that often get shredded, and other items. And, of course, paper versions are still available by download whenever needed.
Small Business Payroll Software
When a small business invests in payroll software and completes the setup, the processes become quicker and more efficient. The software pays for itself as time progresses. The time savings alone is a huge benefit. Some programs even signal error warnings that can be remedied before paycheck distribution.
What about accounting and HR?
Complete accounting and HR support options are also available for small businesses, along with payroll management services. Paytech offers these services starting at $51 per month, including direct deposit management.
Without a reliable and consistent process for payroll, your business cannot stand. Take advantage of the latest technology available with Paytech’s payroll options for small businesses.
Paytech is a local provider that understands the needs of business owners and HR departments. We assign you a dedicated account manager to help you navigate your setup process. They will also be available for ongoing maintenance and sharing with you our latest updates and modules. Book a meeting time with one of our experts today at 602.900.8807 or [email protected]