Contract Payroll Can Avert Future Problems

CE Pro
May 2002

Minor accounting errors could cost companies in IRS penalties.

Many small-business owners, including custom electronics installation companies, know first-hand of the sometimes painful process known as company payroll. [] Keeping up with all the changes in payroll regulations and withholding tables can be a full-time job. Getting it right can be a nightmarish challenge [] The worst possible scenario is that if you make a mistake, your employees and the Internal Revenue Service (IRS) will read you the riot act. The IRS indicates that one out of every three employers has been penalized for a payroll mistake. These mistakes ultimately account for billions of dollars in fines. [] When you factor in the value of your time and the prospect of penalties if you make a mistake, processing payroll internally can be very expensive. That's why many companies have turned to outsourcing their payrolls. If you connect with the right company, it can save time and avoid tax errors.

What's New in Outsourced Payroll?

Just as your business continues to evolve, so too have the nation's payroll services. New outsourced payroll solutions on the market 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 inconveniently had to jump out of important meetings to call in payroll.

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 too complex, as it was designed to handle the payroll needs of large corporations, such as IBM, rather than the simple needs of small businesses.

The new breed of outsourced payroll services overcomes these deficiencies by offering simple Web-based interfaces. With Chicago-based SurePayroll's offering, for example, all you need is a Web browser and an Internet connection. Once you enter your payroll data, the system automatically calculates, deducts, pays and files all taxes. You decide when and where you want to process payroll. Other companies such as ADP, Paychex, Ceridian and Wells Fargo offer similar types of payroll services that are specifically designed to fit the needs of small-business owners.

One of the added bonuses of using these types of payroll services is that, because 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 him or her the information on the phone. The odds of an incorrect check or direct-deposit amount are substantially reduced.

The number-one prerequisite of a good payroll services company is not only to have a vast knowledge of the fundamental tax laws, but to keep up with any changes that might occur on a year-to-year basis.

A few of those fundamental payroll services include the calculation of payroll and withholding obligations. These functions 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 will also 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 the payroll service you choose can address your company's unique needs. Most services will handle your basic needs-for example, if you have to pay payroll taxes to multiple states-but if you have complex needs, you may have to go with a larger provider like ADP.

Be sure to understand all the costs up front. Occasionally, additional charges will add up to make what initially seemed to be a good price not so attractive after all.
If you choose the right provider, you'll be happy and your payroll provider will be happy. If you try to put a square peg into a round hole, you'll find that neither you nor the payroll provider will be happy. Take the time to talk to providers and make sure that the offering works for you. [CE Pro]

Michael Alter is a senior vice president with SurePayroll, a leading national payroll service provider exclusively for small businesses. He can be reached at 1-877-954-7873 or at malter@SurePayroll.com.

SIDEBARS

Snapshot

Using a payroll services company can relieve the stress of performing payroll duties.

Web access, multi-state employees and "live" customer service reps are considerations.

It is important to find a payroll service that can specifically address your company's needs.

Contact Information for Payroll Providers

ADP: ADP offers a full range of benefits, payroll and business management services. Visit www.adp.com for more information.

Ceridian: Ceridian is a large national payroll processor. Ceridian recently introduced a Web-based payroll solution, PowerPay. Visit www.ceridian.com for more information.

Paychex: Paychex is a national provider of payroll, human resource and benefits solutions to small business. Visit www.paychex.com for more information.

SurePayroll: SurePayroll uses a Web-based plan to offer small businesses lower-cost service. A flat fee includes payroll processing, all tax filing and payment, quarterly reports and more. Visit www.surepayroll.com for more information or call 877-954-SURE.

Wells Fargo: Wells Fargo has been offering payroll services to small companies for 40 years. Its OnlinePayroll offering is for businesses that want to run payroll online. Visit www.wellsfargo.com/biz for more information.

Copyright © 2002. CE Pro.