Running a small business is no small feat; there are lots of administrative tasks to tend to, especially if you have multiple employees. Instead of doing everything on your own, you have options to outsource some of these tasks to companies who focus on nothing but these services. Payroll is one such commonly outsourced service and if you are considering this route, here are a few things to consider in the decision-making process.
What Do Payroll Service Providers Do?
Payroll service providers offer a range of services. A basic package consists of calculating payroll and taxes owed, producing reports and printing and giving out checks. They may offer related services for additional fees. Some may not only calculate your taxes, but handle filing and payment; providers can also handle direct deposit, sending out W-2s, manage employee benefits and make 401(k) deductions.
Do You Need Payroll Services?
There are certain signs that outsourcing your payroll services is the right move for you. If any of the following situations apply to you, it may be time to start scouting companies. Do you lack confidence in your calculations? Are you sending in deposits late? The IRS can levy late deposit penalties up to 10 percent—no small chunk of change. Do the number of employees you have make it difficult to keep up with the work load? Is handling payroll taking you away from more important activities that will contribute directly to expanding your business?
Companies that handle payroll are doing so for many businesses, which means they can offer competitive pricing for these services; if you have less than 20 employees, it is likely that you can find a plan that will cost less than what you are currently spending on handling payroll in-house. Filing taxes incorrectly can result in big-time fines from the IRS and small businesses are particularly vulnerable. Payroll companies are experts, and they know all the latest rules, regulations, required forms, withholding rates and the like. Since you are getting the service for a fixed cost, you can better manage your business expenses.
Choosing a Provider
There is no shortage of payroll outsourcing services to choose from, and you must tread carefully. You need to pick a reliable company. No matter what, correct filing ,and proper payment of payroll taxes, is ultimately your responsibility; you will not be able to shift blame to the provider. Referrals are always a good place to start; besides talking to other business owners, talk to your accountant or someone at your local Small Business Development Center. Determine what you need upfront so you can work on negotiating a flat rate. Find out how the company delivers payroll data to you after it is completed. As far as filing goes, you need to find out some important information. If they file incorrectly, will they assume the penalty fees? Do they provide assistance with local tax filing? Inquire about customer service—what hours and through what means can you reach someone? What are average response times? Ask for references, and more importantly, follow up on them!
About the Author: Kelli Cooper is a freelance writer who blogs about all things business.