Outsourcing Your Payroll

September 15, 2012 in , , , , ,

How do you know when you’ve reached the point where you need help processing your payroll, remitting payroll and withholding taxes to tax agencies, and dealing with such issues as workers’ compensation, health insurance, retirement plans, and garnishments? It’s hard to know if such tasks can be effectively handled by an employee, bookkeeping software, or a CPA. Only you can know for sure.

But the rise of third-party payroll processors across the country is a sure sign that experts can often do the work faster, more accurately, and less expensively than handling it yourself, using internal resources, or asking your CPA to assist you. Here are some things to look for when considering a third-party payroll processor:

Tax Payment Service
Taxes may be inevitable, but they don’t have to be difficult. A good payroll provider will handle federal and state taxes, and in some cases local taxes, for your business. You may want to look for a payroll company that offers an automatic, electronic tax payment option. This service will calculate, deposit, and file your payroll taxes for you, so you’re free to concentrate on more important things such as managing your business. It will also help you avoid large, lump sum tax payments by regularly setting aside funds as you incur liabilities. These funds can be deducted on payroll check dates, and offer the ability to withdraw from multiple bank accounts, so it’s easier to control your budget and forecast your finances. The service should include automatic enrollment in the Electronic Federal Tax Payment System (EFTPS), which meets Internal Revenue Service (IRS) requirements for businesses that must deposit Forms 940, 941, 943, and 944 electronically.  This feature has become even more important in 2011 as almost every employer must now deposit federal taxes via EFTPS.

Employee Direct Deposit Payroll
More than 93 percent of employees nationwide currently participate in direct deposit. While employees appreciate direct deposit’s security and convenience, it can also make your payday more economical and productive. Direct deposit removes costly, labor-intensive paper checks from your payroll process. As a purely electronic method for transferring wages, it also reduces human error, making your payroll process even more efficient and accurate. Furthermore, employees appreciate the convenience and security of direct deposit. It provides fast access to cash, eliminates a trip to the bank, and maintains their control over where deposits are made.

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Garnishment Payment Service
Although withholding and remitting employee garnishment payments can be complicated, a garnishment payment service option can make your job easier. A good garnishment service withholds garnishment payments from employee wages, remits garnishment deductions to the corresponding agency, offers electronic transfer of funds where accepted or required, and provides support to assist with individual issues when they arise.

Flexibility and Options
Look for a payroll company that is flexible enough to meet your specific needs, such as submitting payroll by phone, fax, or online. No two businesses are exactly alike, but many businesses share similar needs when it comes to payroll information and payroll processing. Make sure your payroll company offers you all the management reports you’ll need, such as employee earnings statements; payroll journals; month-to-date department summaries; a notice of cash needed to cover payroll expenses and tax liabilities; timely and accurate notifications of tax liabilities and deposits; and payroll worksheets to record your next payroll.

Retirement Plan Administration and Independent Insurance
Does your payroll company also offer retirement plan administration and independent insurance options? Not all of them do, but it’s a great service to explore if available as it allows payroll and benefits to work together. Included are such things as workers’ compensation, group health insurance, 401(k) plans, and flexible spending accounts. Providing these benefits to your workers through a payroll service provider will help you retain the best employees.

Data Security
Data security from a nationally recognized, publicly traded third-party payroll processor provides the kind of scheduled and highly maintained information security that is often beyond the capabilities of small to mid-sized businesses that cannot afford their own information security professionals. In today’s world, protecting sensitive data is a necessity. National payroll companies stake their reputations on protecting their clients’ information and could not exist if they did not offer the highest level of security 24 hours a day, every day.

These useful tips may help you decide whether a third-party payroll processing company is right for you, but they are by no means the only considerations. Ultimately, outsourcing helps business owners and managers put more time into what they do best, running and managing a business. It’s best to assess the needs of your business, shop around, and look for a company that offers individual service and plenty of options that will help you as your business grows and changes.

The information in this article should not be treated as payroll or tax-filing advice. It is provided for informational purposes only. If you require more information, or need professional assistance, you should consult your CPA or tax professional.

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