What Do Payroll Services Include?
Pay day is important. Just ask your employees. Correct and efficient payroll is essential to the livelihood of your business no matter the size. It ensures engaged and happy employees, but it is also important to avoid legal issues.
There are four ways to provide payroll services to your employees, and each of these ways has different service offerings. The first is in-house payroll. The services offered in-house depend upon the knowledge and talent of your employees. Standalone, in-house payroll is usually very limited and manual, unless your business has a talented internal development team.
The second payroll method is contracting a professional. This could be a payroll manager or CPA. These contractors could manage your current system or advise you to use a certain payroll system. Third, business owners can outsource their payroll to an agency or payroll company. This increases reliability, because the payroll system is being used and monitored by experts. Finally, businesses can use a software payroll system. Some types of software manage the entire employee payment process, from calculations to taxes, based on information inputted into the system.
What does a payroll service provider do?
A payroll service provider calculates payroll and taxes, executes payroll, and collects the data accordingly. Full service payroll providers can also manage deposits, withdrawals, benefit management, witholdings, etc. Most payroll companies offer additional services complimentary to payroll. For example, I-9, 1099, or W-2 document management is one common feature. Other providers also offer HR support.
Payroll service providers also give clarity to employees about their pay stubs and withholdings. For some payroll systems, the employee interface is not as clear. Ideally, workers should have a clear idea of their gross and net pay, and how much money is being withheld for retirement planning or federal and local taxes. Employees should also be able to easily adjust their tax documents for qualifying life events, such as being married or having children.
Payroll service providers should also make sure your payroll practices are scalable. If your company chooses to do in-house payroll, this process can be practical for the first 10 employees, but is often difficult and expensive later on. Payroll service providers should have the capability to grow with your business to keep the employee experience consistent and minimize administrative change for your company.
What are the major types of payroll processing methods?
There are 4 main types of payroll processing methods based on frequency. Here is a list in order of popularity:
- Bi-Weekly: This is the most common type of pay frequency because of its consistency and the amount of work it takes for payroll managers. It is consistent on the day of the week employees get paid, and it is less work than a weekly payroll method.
- Weekly: Weekly is more common for hourly or contract employees. It is more work for payroll managers, as they have to cut 52 checks per year. Employees can rely on checks coming on the same day every week.
- Semi-Monthly: A semi-monthly payroll is very similar to a bi-weekly payroll. The main difference is that the semi-monthly checks are paid on certain days of the month rather than certain days of the week. For example, a company may pay its employees on the 15th and 30th (or last day of the month).
- Monthly: Monthly is the least popular type of pay frequency, because it can leave employees feeling stretched too thin at the end of the month. It puts more pressure on their budgeting, and it can make it harder for them to handle financial emergencies.
How much does it cost to have someone do your payroll?
The two most common pricing models for payroll are per employee per month (PEPM) fixed-fee pricing or hourly pricing. Payroll companies or contractors that do a PEPM model usually charge between $12-$25 a month for a semi-monthly or bi-weekly pay frequency. These numbers increase for weekly paychecks and decrease for monthly paychecks.
An hourly payroll company or contractor ranges from $15-$45/hr, depending on the complexity of the work, additional tasks, and number of employees. The advantage of hourly work is that you only pay for what you need. The disadvantage is it isn’t as predictable to budget for month over month, especially if your company has major hiring surges or a larger lay-off.
Milestone makes payroll simple.
If you’re tired of trying to do payroll manually, Milestone can help. Our experienced team makes payroll simple and efficient for businesses of all sizes. Contact us today. We are happy to answer any questions you may have.
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