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What Is a Payroll Service?

What Is a Payroll Service?

Payroll plays a much more important role in an organization than just handling pay slips and envelopes. It ensures that every employee is fairly compensated every payroll cycle and that all legal contributions are taken care of. Vital as it is, the task can be daunting, especially for small businesses.

Why Is Payroll Important?

Think of payroll as the oil that greases the company machinery to guarantee smooth and efficient operations. A payroll problem, which can be as minuscule as a single decimal place, can result in a glitch that disrupts organizational harmony and fluidity. Here are three reasons why payroll is important:

Keeps Employee Morale in Check

Salary is integral to employee motivation. Every employee wishes to be paid according to the work he does, the hours he puts in, and on a regular basis. Payroll errors require paperwork, disputes, and a significant amount of time to resolve, which can put off an employee’s momentum and lead to demotivation.

Compliance with Tax Obligations and Employment Legislation

Payroll is responsible for the correct and timely deduction of an employee’s tax obligations such as federal income tax, state tax, local income tax, and other deductions such as Social Security and Medicare taxes. According to Payroll Specialties, an Oregon payroll service, incorrect deductions and filing can cause huge problems for the company: fines, lawsuits, and in extreme cases, closure.

Good Reputation

What’s good for the employees is good for the company. A payroll that pays fairly, accurately and in a timely manner is an indication of great corporate ethic, which is a valuable quality in order to retain both business and an excellent workforce.

Given the critical role that payroll plays, it is important to hire only highly qualified staff whose duties are limited to payroll responsibilities. However, this can be difficult for small businesses with limited resources, and this is where a payroll service comes in handy.

What Is a Payroll Service?

A payroll service is an outsourced service provider that takes care of a wide range of payroll needs, including computation of employee salary and taxes per cycle, preparing paychecks, furnishing management reports, filing taxes, and even preparing 401(k).

The payroll service fees you will pay depend on the range of services you will avail. You can hire a payroll service for specific services or you can request that the provider assess and recommend services suitable to your company. Understandably, you pay more when you use a wider and more laborious range of services.

Should You Outsource Your Payroll Service?

Online business magazine Entrepreneur gives pointers on which businesses should outsource their payroll service and which ones should stick with internal processing. Whether you’re a small or big business, it is important to understand the dynamics of your payroll needs. Here are situations that can benefit from a payroll service:

  • The employees work a different number of hours per week.
  • There is a significant turnover rate of employees.
  • Payroll taxes have to be filed for multiple states.

In these instances, a payroll service is a smart, cost-effective choice. However, according to Entrepreneur, “if your payroll expenses are quite stable, you may find handling payroll internally to be just fine.”

What Are the Benefits of a Payroll Service?

Hiring a payroll service takes away a huge load of responsibilities from businesses so that business owners can focus their time and energy on more substantial things. AllBusiness, a resource website dedicated to small businesses, lists the advantages of a payroll service.

  1. Cost-effective. Outsourcing a payroll service can cost less than hiring an entire full-time payroll team or even just a payroll manager.
  2. Convenience. Employee attendance reports and details can be filed and updated either over the phone or online.
  3. Functionality. Payroll service providers offer an extensive array of services that protect the interests of both the employee and the business. Some providers take care of retirement plans, W-2 forms, and management reports.
  4. Accuracy. The credibility of a payroll service is dependent on its accuracy, punctuality, and professionalism.
  5. Compliance. Payroll service providers understand the ins and outs of corporate legal obligations, therefore assuring that your business is 100% compliant with all state and federal mandates.

How to Choose a Payroll Service

Not all payroll service providers are created equal. You should hire a payroll service that wins your trust and confidence and can provide all of your payroll needs., a media brand for entrepreneurs and startups, offers the following tips:

  1. Get a referral from someone you trust and check the recommendation online.
  2. Determine your payroll service budget. It is also important to know whether you’ll be charged on a monthly or a payroll period basis.
  3. Big payroll service providers are not always the best option, as they have a tendency to bundle your package with services that you do not really need.
  4. Be honest and ask critical questions before you hire a payroll service. What are your concerns, worries, and fears? Make sure to bring those up and only once you are comfortable and confident should you make your choice.
  5. The payroll service should be located in close proximity to your business so that you can pick up checks when necessary, pop in for emergency meetings, and be available for critical consultation.

If you’re not 100% sold on any payroll service, request for an obligation-free trial period. This way, you can properly assess the efficiency of the service and cancel if it doesn’t meet your satisfaction.