When to Outsource: Payroll
It’s a decision that most small businesses face at some point.
To outsource or not to outsource? When it comes to payroll, Westchester human-resources consultant, educator, and author Greg Chartier, PhD , says outsourcing is well worth the investment, especially to help manage the complexities of a growing business and applicable IRS and Department of Labor regulations. Here’s a primer on getting payroll processing right.
OK TO DIY, IF:
• You’re a sole proprietor.
• Any employees you have are relatives.
What to Use: QuickBooks Software
Cost: $27 – $57 per month
TIME FOR PROFESSIONAL HELP IF:
• You have up to 10 employees.
• You find payroll difficult to manage.
• You need help with IRS tax-compliance issues.
What to Do: Engage an accountant.
Cost: Accountant fees vary, depending on their level of experience and payment arrangement.
YOU NEED A MORE SOPHISTICATED PROVIDER, IF:
• You have more than 10 employees.
• You need to manage multistate tax issues.
• More sophisticated processing is required, i.e., calculation of shift differentials, PTO, and holiday pay.
• You need to file quarterly payroll-tax reports to state and federal agencies.
• You need help issuing W-2 and 1099 forms at year-end.
• You need to report new hires to the government.
• You want to provide employee self-service options.
What to do: Outsource! Major providers include Paychecks, ADP, and USA Payroll. Options include software downloads or online/cloud-based offerings.
Costs: Base fees range from $20 – $200 per pay period, depending on plan and provider. Most services also charge between $1 and $10 for each paid employee per pay cycle. Some services offer optional add-ons for services like direct deposit.
Chartier adds that perhaps the best reason to outsource your payroll to a service is that they typically assume much of the liability for tax penalites imposed by the IRS for mistakes.