Should a Small Business Outsource Payroll?
For your small business to remain successful, you should consider hiring a payroll service. Even if you have only one employee, a payroll processing service can prepare paychecks, pay payroll taxes, and report on payroll. If you miss a payment or report, a fine may be greater than the total cost of a year’s service. The use of a payroll service is a great way to ensure accurate and compliant payroll. It also saves time.
Payroll services for small businesses can provide a number of benefits. Let’s look at a few:
Payroll services identify and address common small business challenges.
Challenges are a part of any small business, no matter how well run. It is essential for a small business to prepare for challenges, especially common ones, so they won’t become bigger problems. Recently, 11% of small business owners cited payroll and other administrative work as a top challenge. Payroll functions include time-tracking, calculating an employee’s gross wages, collecting employee information, and ensuring that employee paychecks reflect the necessary federal, state, and local taxes. You also have to keep track of payroll data, which is also time consuming. Taking care of these tasks isn’t always easy, and it can consume precious time for busy business owners. A third-party provider that offers turnkey solutions can be more cost and time efficient than hiring and supervising staff to perform these functions.
Payroll services give your small business flexibility.
Growth and success are goals for all small businesses. But with growth comes change. A company will be more robust if it is agile enough to respond to changing conditions and quick growth. A managed payroll service can quickly adjust to your company’s growth, making sure all of your employees are paid on time and that you stay compliant with federal and local laws.
Streamline all regulations, rules, and services related to payroll.
Payroll and Human Resources Departments are often responsible for keeping up to date with complicated rules and regulations regarding payroll withholding and coverage. A payroll provider can manage all rules, regulations, and services. Workers’ compensation insurance is required in most states, for example. Social Security, Medicare, and state unemployment insurance are requirements for small businesses as well. Government action and fines can be imposed on your small business if you do not comply with local and federal regulations.
Numerous regulations apply not only to required coverage and withholding but also to employee benefits. If you provide your employees with retirement benefits, such as a 401(k) plan, you will be liable for any errors during the process. Salary deferrals must be deposited directly into the employee’s account within seven days of receiving the paycheck. You may face a 401(k) tax audit from the Internal Revenue Service (IRS) if your company misses this deadline by just a day. Payroll service providers can handle all of these issues.
Payroll services ensure that employer compliance is maintained.
An outsourced payroll service provider is more than just someone who helps you with payroll. They also provide expertise. Compliance is one of the most important services they provide. Compliance programs are designed to ensure that standards, codes, regulations, and laws are not violated by the company.
As far as compliance is concerned, there are two ways to go about it. To begin with, you must comply with all applicable laws, regulations, codes, and standards – including those imposed by the federal, state, and local governments. In addition to meeting safety and inspection standards, your business must also comply with Equal Employment Opportunity Commission (EEOC) regulations and federal harassment laws. As a second step, you should establish policies and procedures that your employees must follow. It may be necessary to post safety regulations and other relevant standards, for example, so employees are aware of the standards. PTO policies, progressive discipline policies, and drug and alcohol policies need to be written.
There are some small business owners who may question the necessity of written policies and procedures. As part of the overall risk management of the company, they play an important role. For instance, if you don’t spell out policies on progressive discipline and terminate an employee, you may be liable for damages. You are ultimately protected by written policies, and your ability to show you followed them. You can also protect yourself from misunderstandings through your compliance and employee compliance standards.
Avoid fines and fees for your small business.
A tax audit can occur for a variety of reasons, not just benefits. As most business owners know, IRS audit risk is low, at under 2%. But that’s not to say that tax penalties don’t exist. When businesses fail to pay income tax, FICA, or pay taxes late or underpay, these fines can kick in. Your small business may also be affected by compounding fees and fines over time. However, fines can also be avoided relatively easily if tax filing is correct. Your taxes will be paid correctly and on time if you use a payroll services company vs. doing payroll in house.
Milestone makes payroll easy for small businesses.
The expert team at Milestone can take the stress of payroll off of your hands. For more information about how Milestone Payroll services can benefit your small business, contact us today.
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