As a small to medium-sized business owner, managing payroll can seem manageable at first. After all, how hard can it be to cut a few checks every couple of weeks, right? Well, the reality is that payroll isn’t just about paying employees; it involves taxes, compliance, benefits, and a whole lot more that can eat away at your time and expose you to potential risks.
In this blog, we’ll explore the advantages of using a payroll service, as well as some counterpoints, to help you determine whether outsourcing payroll is right for your business.
One of the top benefits of using a payroll service is the time-saving automation it offers. Payroll services streamline processes that would otherwise take hours to manage manually, freeing up your time for core business activities.
Let’s consider a scenario where you run a small business with four or five employees and manage payroll manually. Each pay period, you’ll likely spend around 30 minutes calculating checks, printing them, or setting up direct deposits. That’s just the beginning. You also need to file payroll taxes, submit payments to federal and state tax agencies, and handle quarterly tax returns. When you add in tasks like uploading retirement program files or workers' compensation details, it can take hours to process payroll.
Now, imagine if a payroll service like Your Payroll Department (YPD) took care of all these tasks. Instead of spending over an hour every two weeks, payroll could take you just three minutes. By automating payroll processes and ensuring compliance, payroll services help you focus on what matters most—growing your business.
One of the biggest risks of doing payroll in-house is compliance. Payroll services not only help you calculate payments but also ensure that you comply with federal, state, and local tax laws. If you receive a tax notice, who will handle it? With a payroll service like YPD, we take on the responsibility of resolving tax notices and other compliance-related tasks, so you don't have to.
For example, filing a 941 tax form manually could take 30 to 40 minutes, especially if you're not familiar with the process. Payroll services automate this process, allowing you to focus on your core business.
You might be wondering, "At what point should I consider using a payroll service?" The answer depends on how much time you're currently spending on payroll tasks and how confident you are in your compliance efforts.
Even if you have just one employee or are a sole proprietor, a payroll service can save you time and reduce errors. Many sole proprietors who take the S-Corp route use payroll services to auto-pay themselves, making it easy to cover taxes. This process is completely automated, taking zero time on their end.
As your business grows, so do your payroll and compliance obligations. For example, some states require businesses with just two or more employees to offer sick pay or a retirement plan. With a payroll service, these legal requirements are automatically managed, ensuring your business remains compliant.
While the advantages of payroll services are clear, some small business owners may hesitate because of the cost. If you're running a small business with limited cash flow, the idea of paying $1,040 per year for a five-person payroll service might seem like an unnecessary expense.
But consider this: if you can generate more than $1,000 in revenue by spending your time elsewhere, a payroll service becomes an easy decision. The time you save can be reinvested in your business, making the cost of a payroll service a worthwhile investment.
If you've decided to explore payroll services, here are some best practices to consider when making your choice:
Look for a payroll service that offers full tax management, including tax filings and remittances. Some services offer pared-down packages that don't handle taxes, but you could end up spending more time and energy trying to manage taxes on your own. A full-service payroll provider, like YPD, takes care of everything, so you don’t have to.
Choose a payroll service with an easy-to-use platform that offers employee self-service options. Employees should be able to log in to check pay stubs, request time off, or manage benefits without constantly asking you for information. This feature can significantly reduce administrative burden and improve employee satisfaction.
Make sure your payroll provider offers reliable customer support. Smaller payroll services may provide more personalized service, giving you direct access to a representative who understands your business. This can save you time when dealing with issues or complex payroll questions.
Using a payroll service that also handles your taxes provides a seamless experience. All of your payroll and tax-related tasks are managed in one place, reducing the time you spend on compliance. For example, YPD handles all tax filings and payments electronically, ensuring your business meets all local, state, and federal tax obligations.
Managing payroll is a time-consuming process that involves compliance, tax filing, and employee management. When you outsource payroll, you’re not only saving time but also reducing the risk of errors and non-compliance. For small and medium-sized businesses, a payroll service is an investment in efficiency and peace of mind.
Ready to streamline your payroll and focus on what really matters—growing your business? Let’s chat! Click the button below to see how Your Payroll Department can take the hassle out of payroll for you.