An organization has many different options when considering how to handle payroll accounts. If you run a sole proprietorship or have very few employees, you may consider doing it yourself, and it doesn’t hurt if you’re also quite good with numbers. As you hire more people or find your math skills lacking, you may pursue other options, such as in-house or third-party handling and all the software and expenses that come with them.
Knowing which solution will work best before selecting one is vital, but it may seem impossible to discern if you have no experience in that field. Seeking financial advice should be your first step, whether from a seasoned payroll processor, an accountant, a financial advisor, or an experienced friend. When it comes to money and business banking, there’s no room for trial and error.
Considering the Pros and Cons
1. DIY Payroll
- Pros. Full control over payroll processing. Cost-effective for very small businesses. No need to share sensitive employee data with third parties.
- Cons. Time-consuming and prone to errors without proper expertise. Requires staying updated on tax laws and regulations. Limited scalability as the business grows.
2. In-House Payroll With Software
- Pros. Greater control with automation to reduce errors. Integrates with other business tools (e.g., accounting software). Scalable with additional features as the business grows.
- Cons. Upfront cost of software and potential training expenses. Requires regular updates to stay compliant with regulations.
3. Third-Party Payroll Services
- Pros. Time-saving and managed by experts. Handles compliance, tax filings, and reporting. Frees up resources to focus on core business operations.
- Cons. Higher recurring costs compared to other options. Less direct control over payroll processing. Potential risk of overcharging for unnecessary services.
Legal and Compliance Considerations
Payroll management must adhere to tax laws, labor laws, and other regulations to avoid penalties:
- Tax withholding and reporting. Ensure proper calculation and remittance of federal, state, and local taxes.
- Employee classification. Misclassifying employees as contractors can lead to severe penalties.
- Overtime and minimum wage laws. Stay compliant with wage laws to avoid fines or lawsuits.
- Recordkeeping requirements. Payroll records must be maintained for the legally required period, which, depending on the jurisdiction, is typically 3–7 years.
Go Big or Go Home
Some organizations recommend using well-known brands, as they are the most trusted. Others say doing it yourself is the only way to ensure it’s done right. While neither opinion is necessarily wrong, it concerns your preferences and capabilities. Pat Carson owns a payroll service in San Jose and told Inc Magazine that “there will be folks who love the service they have and would be very willing to recommend people,” but that’s not always the case.
She recommended creating a list of desired services and ensuring that you receive only those services if you choose an outside company. Otherwise, you risk being overcharged for services you may not need or never want.
The Right Tools
The Guardian offered different advice for those looking to host their payroll processing. Mostly, it will hinge on the kind of software purchased, as pen-and-paper books are too easily compromised or filled out incompletely. Seeing as online banking already puts the convenience of payments and account management online, it would make sense for an organization to handle payroll through the internet as well. This will also facilitate direct deposit and electronic review in case of a suspected error.
Depending on which one you select, it’s important to shop around for software or a service, as they usually offer other incentives or price reductions to entice customers. Seek financial advice if you’re still torn between two or more services, and be sure they offer the tools you need before investing in a service to ensure the best chance of success.
Popular Payroll Software
The right payroll software can simplify your payroll processes and ensure compliance. Consider these popular options:
- Gusto. Ideal for small businesses, offering payroll, benefits, and compliance tools.
- QuickBooks Payroll. Integrates seamlessly with QuickBooks accounting software for streamlined operations.
- ADP. A scalable solution for businesses of all sizes with robust features and support.
- Paychex. Offers tailored solutions for small and mid-sized businesses with HR integration.
- Zenefits. Provides an all-in-one platform for payroll, benefits, and HR management.
Finding the best payroll solution is essential for your business’s success. Evaluate your needs and research options, and consult with experts to select the perfect payroll software. Start exploring top-rated solutions today to streamline your payroll, ensure compliance, and free up time to focus on growing your business.