Congratulations! Your business has grown to the point where you are ready to hire employees. You are done with trading hours for dollars and you are building a team to help you with the hard work of running your company. But paying those new employees is easier said than done. As a new boss, you are held to strict payroll laws, tax rules, and employment regulations that are easy to mix up. If you want to hand off the hard work to a computer program or outsourced vendor, you are not alone. Here are some of the best options for a new business to manage payroll.
Do-It-Yourself or Full Service Payroll?
Your first question to ask yourself with payroll is a common first question when faced with a home improvement project: do it yourself or hire an expert? There are major upsides and downsides to both that are important to understand.
I used to run payroll manually for a nonprofit with one part-time employee. I used Quickbooks Desktop for this task, and found much of the experience straightforward. That said, I used to be a Senior General Accountant at a Fortune 500 company, so I had been around the block when it comes to bookkeeping and financial management.
Doing it myself, I was responsible for remembering to enter, print, and deliver paychecks. I had to send quarterly tax payments to the IRS, which when forgotten or delayed meant extra costs and fees. We didn’t have to pay anyone else to do the job and it wasn’t all that much work, but I didn’t have anyone looking over my shoulder or checking to ensure we were compliant with local, state, and Federal employment laws.
In my business today, where I am the only employee, I use an outsourced service to handle my payroll. I get a salary paid weekly, and my provider does everything for me. The cash is deducted from the business bank account, taxes are diverted for state and Federal payments, I get my paycheck direct deposited in my personal account, and all paperwork is taken care of without lifting a finger. However, I pay $45 per month for the service.
Bigger businesses with many employees and no dedicated accounting team are likely best off hiring a service to handle everything. However if you are confident, you can certainly save money doing it yourself.
Decide What Services You Need
Next, it’s time to figure out exactly what you need out of a payroll service or software. Do you want everything handled for you, or are you okay with a mix that includes some hands-on time with paperwork yourself?
These are some of the most common services offered for payroll:
- Salary or hourly payroll entry
- Paycheck delivery via mail and/or direct deposit
- Tax withholding
- Benefit withholdings and management
- Tax reporting and payment
If you run a simple business with hourly employees, payroll, delivery, and taxes may be enough to meet your needs. If you are opening a startup with healthcare, 401(k), and other benefits, you may want that as well. Every provider is a little different, so find a service that offers everything you need and some features you may want in the foreseeable future.
Review Pricing, Support, And Customer Service
Most payroll services charge a base rate and then an additional cost per employee. My service charges $39 per month plus $6 per month per employee. As with most payroll providers, the average cost per employee goes down with more employees.
There are a range of companies offering these types of services, and each has its own unique cost structure and customer support. Options range from startups like Gusto and Justworks to large, established companies like ADP. Depending on your business model, the number of employees, and other factors, one might be a better fit for your needs than another.
Also take into consideration what types of support and customer service you have available as a customer of a payroll program. Because your payroll provider may be submitting tax filings on your behalf, it is important to work with a provider you can trust, easily contact, and quickly get answers to any question.
Narrow Down Your Top Payroll Software Option
At this point, you have reviewed your options, potential costs, and service options. With this information in mind, you should be able to quickly narrow your search down to a few top providers. After reviewing pricing and service, you can pick a winner that stands out from the rest of the pack.
Changing payroll software is not easy, so pick a company that you think will work for the long-haul. Factor in projected growth, as you don’t want to quickly outgrow your provider and change to a better suited service. The time, hassles, and costs of shutting down a payroll service and setting up a new one makes it important to choose the best provider the first time.