Every business, big or small, will spend considerable time taking care of payroll duties for its employees. Some of the repetitious exercises in tedium include the calculation of salaries, withholding of taxes, transfer of payment through direct deposit or checks, compliance with tax regulations, payment of taxes, filing of tax returns, and list goes on and on.
Setting up an in-house payroll department for just a handful of employees can be an inefficient and expensive option for small businesses. This is why every smart entrepreneur must consider the option of payroll outsourcing services once they see how much money they can save. This will be a month over month return.
What is a Small Business Payroll Service?
One-stop payroll solutions allow you to completely outsource the administrative activity of payroll accounting and management. This will leave you free to focus your attention back on the core operations of business growth.
Payroll service providers will use attendance data and the remuneration structure of all your employees to calculate the gross salary payable to each employee, the amount of pay to be deducted for unpaid leaves, the amount of tax to be withheld, and, finally, the net salary payable to each and every employee of your firm.
Payroll Outsourcing Services for Small Business Owners
Small business owners can choose between the following payroll options:
- Payroll management software
- Payroll accounting software
- Software as a Service (SaaS) model
With a payroll software application, you will have to purchase and install, then learn to use the program for automating your payroll activities. The biggest advantage to this option is that all calculations will be done automatically once the necessary data has been entered. On the flip side, you will have to allocate manpower to enter data and operate the program. Further, other tasks like making entries in the accounting software, filing of tax returns and transfer of deposits will still have to be done separately.
A payroll accounting software frees you from the task of making payroll-related entries in your books of accounts. However, the basic disadvantage of having to hire an accountant or a software operator remains.
The last option, the SaaS model, is the simplest, cheapest, and more cost efficient option. You simply provide the necessary data to the payroll solutions provider and all other tasks will be taken care of depending on your level of subscription model.
If you choose a comprehensive model, then the payroll service will include all salary and tax calculations in compliance with federal, state, and local tax rules, preparation of tax forms for each employee, transfer of deposits, calculations related to retirement plans and compensation plans, and payroll reports that can be imported into your accounting software. Neat, concise, professional reports on where all the payroll money goes.
All these features will be available for a fixed monthly rate along with an additional monthly fee per employee (if the total size of your company’s workforce exceeds a pre-determined limit). You also have the option of paying an extra fee for receiving printed checks for distribution or for automated direct deposits to your employees. A significant advantage of the SaaS model is that you can scale your payroll service up or down rapidly depending on growth and business demand.
A smart business owner knows he needs to conserve capital and reduce recurring costs without any disruptions in payroll management or compliance with the applicable tax laws.