Doing payroll yourself is like any DIY project: a great way to save money if you have the time and skills to do it right. It’s a popular choice for new businesses, but the time requirements and—surprise!—costly mistakes can quickly become overwhelming. Be prepared to:
You should also be prepared to do a significant amount of research to make sure you’re fulfilling all your state and local tax responsibilities.
Minimal up-front expense.
Requires a lot of time and an eye for detail. Commit too many mistakes and the fees can make this expensive.
Payroll software helps automate some aspects of the process, such as calculating wages and deductions. Plus, if you have questions, most payroll software comes with some level of support. But you will still need to track and record all employee hours, enter the data, file and pay the right taxes at the right time, and deduct the proper withholdings from every check. Ultimately, compliance will be your responsibility.
Cheaper than an accountant or full-service provider. Automates some parts of the process.
Time-intensive. Leaves plenty of room for error. Doesn’t offer protection from compliance mistakes.
When you enlist the help of an accountant, you get a trusted advisor who probably knows your local, state, and federal tax requirements. An accountant can calculate wages and withholdings, create and distribute paychecks, and file and pay employment taxes, though you’ll still need to track employee hours. You’ll save time, but different accounting professionals handle payroll management differently—many simply enlist the help of a full-service payroll provider on your behalf—so ask yours what level of involvement they’ll expect from you.
Expertise and personalized service.
May not be reachable 24/7, especially during tax season. Fees can be expensive.
Businesses that place a high value on their time and peace of mind often end up partnering with a full-service payroll provider. A full-service provider will either assume or assist with all aspects of the process: deposits and withdrawals, withholding and garnishments, filing taxes, time and attendance, and benefits administration. Some even guarantee your taxes will be done right or will pay to correct errors. And there are usually no up-front costs—you pay nothing until you run payroll. The most common surprise here is that you end up saving money because you are no longer racking up expensive penalties.
Peace of mind. Minimizes workload for your business and provides freedom from costly tax penalties.
Adds a recurring fee to every payroll.
A PEO is a co-employment partnership that can benefit both your company and your employees. It’s similar to a full-service payroll and HR outsourcing provider, but with some added benefits: built-in compliance monitoring, access to premium employee benefit plans at a competitive rate, workplace risk and safety support, and guidance in day-to-day HR topics. A PEO provides you with the simplicity of having a single vendor to support you across your human capital needs.
Access to top-notch benefits for a fraction of the cost. Less responsibility for compliance oversight. Comprehensive workplace safety support. Expert guidance across HR, where you may not want to dedicate resources internally.
Not all PEOs offer the same breadth of services or technology automation capabilities. If you opt to leave the PEO, you’ll need to re-establish your company’s claim status with insurers.
- Tony Vecchio, Owner, Gusto Fino Italian Café