For an average size company or business, a business owner can easily lose eight to ten hours a month performing payroll functions for the company. This does not include the manhours spent by accounting employees involved in the preparation and generation of the payroll checks for each pay period. If you calculate those hours, that would translate to considerable time that could have been utilized for other revenue generating endeavors. Payroll preparation is no doubt a time-consuming and energy-sapping activity which business owners can do away with if they contract the payroll service to another company specialized in this function.
Many business owners will agree that they would rather have someone who will specifically handle the payroll services of the company instead of maintaining a host of extra employees tasked to facilitate the payroll generation. Given a choice, most business owners will most likely opt to be dealing with just one person who will be responsible and accountable for the generation of the paychecks of all the company’s employees rather than talking to a number of employees in the HR or Accounting departments to verify worked hours input, deductions, taxes, etc. The burden will definitely be less if the payroll services of the company is outsourced to an outside payroll service company.
The benefits are most definitely favorable to the business owners. Companies that outsource to payroll service providers can expect to reduce their overhead expenses as there will be no need to engage employees dedicated to do just payroll functions. The payroll service provider will handle the administrative and the relevant legal details ensuring the company’s compliance with state and federal laws and regulations. The payroll service function becomes a cost-effective task for the company. And with the experts that they have, they are able to deliver accurate paychecks using their own efficient payroll system. The company gets away with extra cost on accounting systems and the continuous research efforts on getting updated with new laws or regulations.
An in-house accounting department which performs the payroll functions also takes care of the company’s tax filing and payments. Migrating this function to an outsourced payroll service company, they will handle the accurate calculation of payroll taxes as well as prompt filing with state or federal tax bureaus and the business owner does not have to worry about wrong calculations or penalties for late filings, etc. On top of that, the professionals in the payroll service company can constantly update the owner on any updates or change in the local, state or federal laws concerning taxes.
Some payroll service providers offer a variety of payroll service plans or schemes which can be generally classified into:
- Comprehensive Payroll Service which take care of all the processes of payroll generation including prompt paycheck preparation and generation, direct deposits, state and IRS tax reporting, EFTPS tax deposits, monthly/quarterly/annual payroll tax reports, W-2, W-3 and 1099 forms, comprehensive reports on employee’s benefits (personal, sick and vacation), new hire reports and secured and updated payroll records.
- After-the-Fact-Payroll Services which cover payroll generation based on manually-written payroll records and other payroll details, for posting to the data files held by the payroll service provider to produce, state and IRS tax reports, tax deposits on EFTPS, monthly/quarterly/annual payroll tax reports, W-2, W-3 and 1099 forms, detailed reports on employee’s benefits (personal, sick and vacation), new hire reports and maintenance and securing payroll records and files.
- Online Payroll Processing. The company may opt to just acquire the payroll system software allowing entry of employee’s hours and earnings on a secure online platform to produce self-printed payroll checks, direct deposits, state and IRS tax reporting, tax deposits on EFTPS, monthly/quarterly/annual payroll tax reports, W-2, W-3 and 1099 forms, detailed reports on employee’s benefits (personal, sick and vacation), new hire reports, updated and secured payroll records and files.
As there are other special reports required by the government agencies, the payroll service provider will also be able to customize reportorial preparation of worker’s compensation audits, unemployment claims, child support audits, w-2 and w-3 processing social security audits, processing of 1099 and 1096, federal and state registration forms preparation. The payroll service provider can discuss your specific needs and provide you with the customized solutions that will address those needs.
As there are many companies offering this service, care should be taken to check the background and experience of the payroll service providers or companies you are considering to engage. You can get feedback on their reliability, integrity and credibility, from clients who have availed of their services, too. You can also ask them about the composition of their company in terms of qualifications, licenses and certifications of the accounting professionals providing the service. A good gauge of their financial stability can be checked against their office location, facilities and IT resources. Additionally, you can check their proper permits and licenses with the local, state and federal agencies to make sure they are valid and authentic.
When all of these are satisfied, you are well on your way to bringing your company to a new phase in terms of making the operations and services more efficient, productive and customer oriented. In the end, you can expect significant improvements in the overall operations of your business.
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