Small Business Payroll 101
Small Business Payroll 101

Small Business Payroll 101

From the biggest corporation to the newest mom and pop, it takes a lot of moving parts to run a business of any size. And while the operational differences between large and small businesses are significant, one thing remains the same: payroll.

Payroll processing is something you’ll have to do on a regular basis. And it’s important to get it right every single pay period. If you’re wondering how to do small business payroll, there are several payroll processing options from which to choose. But which is best for you? Keep reading to discover the pros, cons and estimated cost for three of the most common types of payroll processing for small business owners.

Keep Small Business Payroll In-House

The key question here is: how much is your time worth? As the lone facilitator who pays employees, you’re responsible for payroll taxes including federal (Social Security and Medicare tax), state and local taxes withheld from employee paychecks. The tax rates can change on a yearly basis, and without access to a client support system, it’s up to you to stay current and avoid any penalties.

Processing payroll yourself not only requires a close eye on fluctuating tax rates, but you’ll need to process completed employee paperwork (such as a form W-4) for every new hire. Such manual data entry is time consuming and prone to errors, which can incur harsh penalties from the IRS.

The out-of-pocket expense for processing payroll in-house is minimal but consider how much your time is worth and the number of hours worked each pay period to process the checks. Coupled with the likelihood of making a payroll mistake and steep fines, this might not be the true economical option you seek.

small-business-payroll-statistic

Hire a CPA

If you don’t feel like going it alone, you might consider hiring someone to process payroll. Whether that means hiring an in-house HR administrator or outsourcing the task to an accountant, either way it’s not going to be cheap.

An accountant can help you keep an eye on the bank account and complete necessary payroll paperwork like submitting a Form 941, which is required every quarter by the IRS. Outsourcing payroll will also free up time you can dedicate to directly improving your company. You will get experienced guidance that should be able to avoid any payroll penalties for your business.

Not only is it expensive to use an outsourced CPA for payroll, you may feel like you’re losing control and oversight of the business spending and activities when you stop doing it yourself. And, if in the future you ever decide to bring accounting back in-house, you’ll have to refine your skills and start from scratch with a new payroll system.

Partner with an HR & Payroll Company

As a small business owner, you have a lot on your plate. The last thing you need to worry about is processing payroll and possible tax penalties. Partnering with an established HR and payroll company that can handle everything might make the most sense for your business.

While you may think outsourcing to a payroll service is cost prohibitive, once you analyze the benefits you may think differently. A payroll partner will handle all the deposits and tax filings and should cover any compliance or tax penalties if they occur (which, they shouldn’t). They’ll also maintain accurate records that are available in case of an audit. A payroll company keeps up-to-date on federal and local regulations, automatically searching for any available tax credits or opportunities. They’ll ensure your business is compliant at all times.

If you do choose a payroll partner, make sure the company offers additional HR services like recruiting, onboarding and benefits. As your company grows, or maybe even right now, an HR partner who provides more than just payroll can save you countless hours of administrative work, so you can focus on what matters most—your people.

payroll-costs-statistic

What’s the Cost to Do Your Own Payroll?

Again, the real question is, how much is your time worth? The DIY approach only costs your time, and maybe some frustration. Investing in some payroll software may help, but it too has its limits.

Hiring a CPA to handle payroll is expensive, but it does come with some reassurances. Anyone can plug numbers into payroll software, but a good CPA will look for any tax breaks that might benefit your business. The cost of a CPA will depend on where you live and what exactly his or her responsibilities entail. Generally, they charge by the hour.

A payroll partner, such as Paycor, can take an overwhelming payroll and tax situation off your to-do list. Most payroll companies offer package deals charged monthly or per paycheck. The fee can vary depending on factors like volume, tax requirements and service bundles. The most basic packages should include paycheck processing, direct deposit and standard tax filing. There may be additional charges depending on complexity of tax duties, multiple state requirements and if you have employees in other countries.

More to Discover

Labor Law Updates

Labor Law Updates

What are the latest NLRA rules and modifications employers need to know? Join us as we discuss the most noteworthy changes of labor law within the Trump era. Speaker: Justin Flamm As co-chair of Taft’s Employment practice, Justin handles a wide range of labor and employment matters. His experience includes lawsuits and administrative charges involving race, sex, age, disability and religious discrimination; wage and hour matters under the Fair Labor Standards Act; employee handbooks and workplace policies: and other issues relating to employment relationships.

2019 Social Security Taxable Wage Base

2019 Social Security Taxable Wage Base

Both employees and employers have to pay social security tax and split the total amount due for each employee. Currently, the social security tax withholding rate is 6.2% for both employees and employers. For those self-employed, the rate is 12.4% because they have no employer to split the tax. However, the Old Age, Survivors and Disability Insurance (OASDI) program sets a limit on how much of an employee’s income can be taxed in a given year. This limit changes each year and is based on the average wage index. The Social Security Wage Base is the maximum gross income on which Social Security tax can be imposed on an employee.The limit is $132,900 for 2019, meaning any income you make over $132,900 will not be subject to social security...

The Turnover Crisis in Restaurants

The Turnover Crisis in Restaurants

An Action Plan for Owners and Operators Restaurants across the country are experiencing high volumes of turnover at an alarming rate. In 2016, turnover exceeded 70% for the second consecutive year, and the turnover rate in the fast-food industry reached 150%, the highest since data was first captured in 1995*. With record numbers of restaurants and more jobs to choose from, employees are willing to take risks to find the right fit. The demand for restaurant workers isn’t going away, so it’s critical to find the right HCM provider who can help solve your HR challenges with the right combination of technology and expertise. More than 3,000 restaurants across the country depend on Paycor to help onboard new hires, pay them accurately and...

To Avoid an HR and Payroll Implementation Nightmare, Ask ONE Question

To Avoid an HR and Payroll Implementation Nightmare, Ask ONE Question

HR and payroll technology affect every aspect of your business, so if your current provider isn’t meeting your needs, your entire organization suffers. And yet so many business leaders settle for mediocre HCM because they’re (legitimately) afraid of implementing a new system. The good news: you can avoid an implementation nightmare by asking one simple question: Is My HCM Partner Collaborative? How can you tell if you’re working with a collaborative HCM company? It’s easy. Ask yourself: Do they talk more than they listen? If so, they probably aren’t taking the time to understand the particulars of your business, which is the root cause of most implementation nightmares. Related Article: 5 Questions to Ask Before Implementing a New...