Your business is growing and you need help! But hiring that first employee can be a little scary. What if you make a mistake? And of course, there’s that whole payroll issue. Forms need to be filed. Taxes need to be collected and paid. It’s an unpleasant task that often holds owners back and hinders growth.
Fortunately business owners today have a lot of options to make it easy and affordable. Payroll involves more than just writing checks to employees. It’s why most accountants and business coaches recommend small business owners use a payroll service. Here’s why.
Why Use a Payroll Company?
Payroll companies stay on top of federal, state and local tax changes and other labor-related issues. They will keep you advised of them so you remain in compliance. They also free you up to focus on tasks that are more important – like developing your staff, serving your customers and acquiring new business.
While outsourcing saves time and money, you still have some responsibilities when it comes to payroll. First, you must put aside taxes (employee and company contributions) so they are available when due to the various tax agencies – regardless of who sends the actual payments! Second, you must submit employee payroll information, such as the number of hours and rate of pay, accurately and on-time to meet your scheduled pay periods.
7 Payroll Mistakes To Avoid
- Missed tax deposits and filing deadlines. This can result in large penalties for late payment or reporting.
- No cross-training on the payroll. Even if you outsource payroll, some tasks must be done in-house. Document the process, including gathering time sheets, calculating hours, approvals, and submitting payroll (or entering it into the system if you do it in-house). Train more than one employee – so an absence or illness will not cause a major disruption or delay.
- If you do payroll in-house using software programs like Quick Books, don’t assume tax changes are automatically done for you. Some taxes are automatically updated, others, especially local and some state taxes, are not. Be aware and update them as needed. If you are unsure, check with your accountant or payroll specialist.
- Mishandling or not reacting to garnishment notices in a timely fashion.
- Incorrectly classifying workers. Employees (W2) versus independent contractors (1099’s). This is governed by state regulations, not by the company or worker. This impacts tax reporting for both.
- Unclear responsibilities. Payroll companies offer a menu of services so businesses can customize who does what. Be clear on what tasks the payroll company will handle – and which ones are your responsibility.
Choosing a Payroll Company
Selecting a trustworthy payroll company is important because they will have access to financial information (yours and your employees) and your staff’s social security numbers. Reputation, price, services offered, responsiveness and responsibility are all factors to consider.
Special thanks to Andrew DePascale of Paychex, my go-to payroll guy for small businesses in New Jersey. I appreciate your knowledge and support. For payroll solutions or questions, feel free to reach out to him at (609) 410-6528.
Related: 7 Questions to Ask Before You Make Your First Hire
Ready to Put Your Business on the Path to Success?
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To learn more or schedule an appointment, call me at (856) 533-2344 or drop me an email Joan@HybridBizAdvisors.com
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