Managed Payroll Services: What are they, What are the benefits, and Do you need to hire an agency?

Managed Payroll Services: What are they, What are the benefits, and Do you need to hire an agency?

Whether you are running a small business with a few employees or a large corporation with thousands of workers-handing the responsibilities of payroll management over to a third-party can save you time and stress! But when is the right time to get a payroll company involved? Payroll management can be a headache when you don’t have the right tools, are not aware of state or federal regulations, or simply don’t have enough time. The last thing you want to do is put your company at risk by not following a tax code correctly.

If any of these challenges sound familiar to you, it may be time to consider payroll management services.

What is payroll management?

Payroll management is the process of paying your employees, which involves keeping records of wages, bonuses, and taxes withheld.

As a business owner or a payroll manager you are responsible for:

• Recording and updating all payroll activities
• Calculating employee earnings
• Determining withholdings (i.e., taxes, social security, and healthcare)
• Staying up-to-date with new state and federal regulations and tax rates
• Prepping and filing tax documents
• Paying your employees

What do payroll service companies do?

Payroll services companies specialize in payroll management and have an in-depth knowledge of state and federal regulations in regards to determining tax withholdings.

The primary goal of hiring a payroll company is to streamline the payroll processes so that you don’t have to worry about how and when employees are paid.

Businesses can hire payroll agencies to take on some or all the responsibilities of payroll management that a business owner or payroll manager would otherwise be responsible for.

Benefits of Payroll Management Services

Managed payroll services can be extremely helpful. Many businesses today rely on payroll companies to navigate compliance risks and keep the entire process organized

While you can opt to manage payroll yourself or by hiring a dedicated payroll manager, here are 3 major benefits of fully managed payroll services that might make you change your mind.

1. Prevent IRS penalties and compliance risks

Payroll mistakes and missed deadlines are not all that uncommon, especially for small businesses without a dedicated payroll manager or service. These mistakes, if left unaddressed, can turn into penalty fees from the IRS. As an employer, you need to understand wage laws or have an expert who does. Hiring a payroll agency provides the benefit of having a team of professionals that are up-to-date on the latest tax regulations, and a reputable provider will guarantee accuracy and compliance.

2. Control and reduce overhead costs

Managed payroll services provide businesses with the flexibility of turning fixed overhead costs into variable costs, which is great for seasonal businesses who don’t always need full-time workers or small companies that can’t afford to commit to a salary.

Rather than bringing on a full-time employee with benefits, adding an independent or temporary worker to your payroll will save you money during downtime and can always be brought on as full-time later on.

3. Save time (especially for small businesses!)

If you manage your payroll, you know how much time it can take-even for a small team. Many small businesses don’t have the time or payroll automation software to complete the job efficiently and on time.

When you outsource payroll responsibilities, you no longer have to dedicate your valuable time or that of another staff member. Payroll is one of the most tedious and time-consuming tasks employers have to deal with. Working with a payroll agency lets you stay focused on day-to-day tasks and running your business.

Payroll Software vs. Payroll Services

Payroll software is a must for anyone who opts to keep their payroll in-house as it automates many aspects of the payroll process such as calculating wages and gathering data for tax filing purposes. It also allows for more internal control and is easier to make immediate adjustments.

While it does automate some processes, you are still responsible for inputting employee data and any mistakes and penalties that come as a result.

Payroll services are great for companies that want to be hands-off of payroll operations. The biggest advantage of payroll services is that as the employer, you don’t have to worry about the details of payroll and tax laws.

Payroll services also provide you with professional assistance when it comes time to file taxes.

Ultimately, the solution that works best for you will be determined by the size and complexity of your business. Both come with a fee, but you will want to factor in the amount of time each solution will potentially save you.

When should I consider hiring a payroll management company?

Millions of businesses each year are issued payroll tax penalties by the IRS. A majority of these penalties are against small and medium-sized businesses that can’t afford payroll management software or who don’t have a dedicated person with the time and knowledge to manage payroll.

Not sure whether you should manage payroll in-house or hire a payroll service company? Ask yourself the following questions:

• Who is currently handling your payroll and compliance?
  Many small to medium businesses rely on the owner or another full-time staff member to manage payroll part-time in addition to their other business duties which makes it hard to stay organized and remain up-to-date with changing tax laws.

• How do you stay up-to-date on new compliance regulations?
  You or your payroll manager should have a formal process for keeping up with tax laws and regulations-if you don’t, you are at risk! Payroll management companies stay up-to-date by reading compliance publications and have automated systems that provide alerts on changes to tax laws.
• Are you accurately tracking and paying time worked?
  If payroll is becoming a weekly chore that you simply don’t have time to do properly, outsourcing it can be a lifesaver and can cost less than the time you would have spent otherwise trying to complete it.
• How are you currently tracking employee records?
  Many businesses still rely on pen and paper, which doesn’t make it easy to gather information like an automated payroll system. Payroll management companies use automated payroll software to help keep your employee payroll data organized and easily accessible. If you are still using paper to track payroll, consider hiring a payroll service provider.
• When was the last time you audited your payroll process?
  Are you sure things are being done right? Processes should be audited at least quarterly to ensure there are no compliance risks.

If any of these questions raise concern about managing your payroll, consider reaching out to a reputable agency for help.

Choosing a Payroll Management Company

When looking for a payroll service provider, you will want to find a company that is reputable, cost-efficient, and that aligns with your business needs. You will also want a provider that understands your local area and the job positions you staff.

If so, you need to update that resume ASAP.

Depending on what you are looking to accomplish with payroll services consider potential service partners questions about how they handle adjustments to payroll, paychecks and direct deposits, reporting, tax filing, and 401k plan administration.