No matter the number of employees, the payroll function of a business is often much more arduous and costly than it needs to be, especially when your business is growing. With so much at stake, including legal, tax, and regulatory issues, employee morale, cash flow considerations — not to mention overhead costs — it is critically important for businesses to find the most effective and efficient payroll solution for their current and anticipated needs.
A small business with just a few employees could get by fairly easily with a manual payroll system consisting of a spreadsheet and a calculator. To make things easier, there are free online payroll calculators that will compute pay, tax withholding and benefit plan deductions.
- Lowest cost
- High degree of control
Cons: Can be work intensive and time consuming
- Greater possibility of errors
- Reporting and deposits must be done manually
If your business is ready to hire an accountant, some also provide payroll services. While these will increase your accountancy fees, they will ensure your payroll is done right and on time.
- No internal staffing needed (cost savings)
- Expert tax help
- Error-free guarantee
- Give up control of payroll
- Higher cost
Online Payroll Service
An online payroll service can be a cost effective solution for smaller businesses that would like to free up staff time. The service operates strictly in the cloud and can be accessed anywhere there is an internet connection.
- Quick and easy once the data has been uploaded
- Payroll calculations and tax payments done automatically
- Payroll can be accessed anywhere by computer, mobile app or tablet
- Loss of control of the data
- May require back and forth communications to correct errors
- No access if internet connection is unavailable
Full Service Payroll
For fast growing businesses, a third party payroll service provider can take on all payroll responsibilities with the capacity to adjust the service level to accommodate employee growth.
- Personal representative managing the relationship
- Error-free guarantee, with tax penalties covered
- Cloud-based system allows for direct access by business (retain some control)
- Deposits, reporting, and filing handled by the provider
- Saves the most time
- Slightly higher cost, with typically a monthly service fee
Most business owners never imagined themselves actually managing payroll. However, regardless of the size of your business or the number of employees, all businesses are subject to the same reporting and filing requirements. Whether they have one employee or 50, the same calculations need to be done each pay period and the same penalties apply for errors or deadline breaches.
The moment the payroll function begins to impede on the operational efficiency and bottom line of the business, this is the time when you should consider upgrading your payroll process. Better yet, business owners need to anticipate their payroll management needs and consider solutions that can evolve along with the business.