Making Sense of Business Payroll Options
Posted on Mon, Nov 29, 2010
If you’ve just started a small business or you’re thinking about starting one, you may be wondering: Is it necessary to use a payroll service?
Of course, you only need to worry about payroll if your business has employees. And because employees generally do like to be paid for their work, you will need to decide how you’ll go about paying them.
Most employees aren't going to care how their paycheck is processed, just that: a.) their paycheck’s good b.) it’s correct and c.) it’s on time!
So it’s really up to you to decide how you’ll process your employee payroll. Luckily, you have several options. Which payroll option makes the most sense for your business?
There are four main choices for most small business payroll:
1. Select an outside accountant to handle all or a portion of your payroll needs. You supply the data, and an accountant will basically handle all your payroll processing and payroll tax filings so you can focus on more important things, like running your business.
2. Use an outside payroll services company to process your paychecks. You supply your payroll data to the company, and they actually print out and mail the paychecks to you to distribute to employees or process through direct deposit. These companies can handle payroll taxes and filings and may offer additional levels of services, depending on your business requirements.
3. Handle your own payroll with off-the-shelf or online payroll software. Enter your data, and the program calculates and keeps track of employee payroll and taxes. You can take care of payroll liabilities and tax filings yourself, or let a payroll tax service do it for you. While payroll software packages require a learning curve, they offer flexibility -- print out paychecks, hand-write them the old-fashioned way or offer direct deposit. With an online payroll software service, you can pay employees anytime and access your data anywhere you have an internet connection.
4. Figure your weekly payroll by hand using free government-provided payroll deduction tables. While this is certainly the cheapest option for small businesses, there are several downsides: time, accuracy of your data, and potential to miss important payroll tax changes. And it requires plenty of thought and some knowledge of tax laws!
While every payroll option has its pros and cons, ultimately you have to factor in your budget, comfort with technology, and time available when choosing what method to use. Total costs (and remember, time = money) will vary based on your payroll needs.
So the question comes back to you: whatever payroll solution will be the easiest, most accurate, most convenient and most cost-effective for you is the best payroll choice for your business.