Online small business payroll processing was once considered a novel option only for big companies, but it has quickly become the standard for businesses of all sizes.
Payroll is typically a business owner’s largest expense, and tracking it by hand or with spreadsheets used to be the only way to do it. Fortunately, small business owners have better options now.
In 2019, the Global Payroll Management Institute released their predictions of “5 Emerging Global Payroll Trends.” In that article they speculated that:
- More businesses would move to a platform-based system of handling payroll.
- Managing mobile and remote employees would be the new normal. (Remember, they had no idea what COVID-19 was about to do to 2020.)
- Staying on top of compliance issues would become more of a challenge.
- Automation would help streamline payroll processes.
- Businesses would need to find ways to integrate HR and Payroll systems that are often disconnected and unrelated.
Looking back over the trends we’ve seen recently, I’d say they were extremely accurate in their guesses. You may not be the kind of global enterprise that they’re writing to, but what they pointed out a couple of years ago definitely applies to your small business payroll today.
We’ve been offering HR & Payroll Services to our clients for years. As more and more companies transition from in-house traditional payroll processes to online payroll processing platforms, we thought it would be a good idea to dispel some of the common misconceptions surrounding the topic.
Online Small Business Payroll Processing Misconceptions
1. Online payroll systems can expose sensitive employee information.
In a world where it seems like everything is vulnerable to hackers, it’s only natural that you would want to make sure your employees’ personal information is protected. It’s why you lock the filing cabinet where their HR information is kept!
We get it. Moving that information out into the cloud so you can share it with a third-party payroll vendor can make you feel a little nervous. Once it’s outside your office, it seems like it’s out of your control…who all can access that information, and what happens if that company gets hacked?
That’s why we go above and beyond at CRS CPA to encrypt every bit of data that is stored on our servers to ensure the safety of your company’s sensitive information. We also use strict internal processes to guarantee that no one sees your data who isn’t authorized to do so. And as fiduciaries of our clients, we are governed by a rules that impose stiff penalties for messing with their information.
As a matter of fact, your employee payroll information may actually be safer with an outside company than your own!
The Association of Certified Fraud Examiners reports that a large percentage of payroll fraud is done in-house. Common schemes include: ghost employees (someone not employed by the company is on the payroll), overpayment (an employee’s hours or pay rate are tampered with), and false commissions (the number of sales or the commission rate are adjusted inaccurately). To learn more, you can download an informative lesson from the ASFE on the topic of payroll fraud.
2. It’s more reliable if we do it ourselves.
Payroll processing and HR compliance are extremely time-consuming tasks, especially when it may not be your area of expertise. Keeping up with employee hours, pay rates, hiring & firing legalities, benefit deductions, calculating taxes (and staying on top of changes in the law), entering the data, and cutting the checks or initiating direct deposits…it’s a lot on top of the thousand other things required for you to run your business!
Then there’s all that has to be done at the end of the year with tax preparation!
The chances of mistakes being made under those circumstances are extremely high, and the penalties issued by the IRS are costly. You can have much more peace of mind about the accuracy and timeliness of your payroll when you know it’s being done by undistracted experts who have been doing it for a very long time.
3. It’s only for big businesses. Smaller companies can do it differently.
The federal government mandates that all employers follow a very specific set of regulations when it comes to payroll processing. The instant you have one employee, you are bound by the same rules as large multinational corporations when it comes to paying them accurately and on time.
No matter what size company you have, the basic processes for managing payroll are the same as well.
4. Payroll rules aren’t the same for independent contractors and seasonal workers.
Specific payroll laws bind every employee that receives money from your company . Even if someone working for you is an independent contractor, you still have to pay them on time, document every dollar you give them, and provide them with a 1099 at the end of the year. Seasonal workers don’t get a pass, either. Many business owners think they can simply pay these short-term employees “under the table” to avoid taxes or extra paperwork, but they are setting themselves up for trouble.
This article on “How to Simplify Mass Seasonal Hiring” from The HR Technologist may also be helpful.
5. I’ll lose control over my small business payroll if I outsource it.
We always recommend doing business with people you trust. If you feel like an outside payroll processor is going to keep you out of the loop, then that company isn’t a good one.
When we work with a client to help them with their HR and payroll processing needs, we become a partner with them. We are not in charge…we are simply experts who guide you through the process. Then we take on the tasks that keep you from focusing on your business.
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Our payroll clients always have 3 options when it comes to how much they want us to be involved:
- Online Payroll Processing. They enter employees hours and earnings online securely, and are able to print checks themselves or do direct deposits. We maintain the data and provide them with all the needed reports throughout the year.
- After-the-Fact Payroll Services. They manually prepare their information and cut the checks themselves. Once they send the paperwork to us, we convert it to data file, helping them with reports and managing records.
- Comprehensive Payroll Services. We handle it all so they can focus on growing their business. Payroll checks prepared, printed, and posted like clockwork. Worry-free IRS and State tax reporting. Employee records and benefits (like PTO usage) managed accurately. Assistance with new hires. Secure storage of all payroll data on our servers. … And all of it done with your knowledge and approval.
6. Outsourcing is too expensive! We save time and money doing it ourselves.
Don’t automatically assume that online payroll processing is more expensive. Have you stopped to consider how much your time is really worth? As the head of your company, you are much more valuable as a visionary leader than a payroll data entry processor.
Every hour you spend doing tasks that other people could do (often even better than you!) is an hour that you are not able to do what only you can do!
By the time you factor in how much you have paid yourself (or someone on your team) to manage your payroll, how many other things you weren’t able to get done, and how much simple mistakes could cost you… you could have outsourced your payroll processing to a professional for a whole lot less than you think!
7. Outsourcing is complicated.
If you’ve been paying employees up to this point, you’ve already got everything you need to make the switch to online payroll processing. The forms and employee information you have on file can easily be used by third-party payroll pros to make the transition seamless.
We’ve been doing this a long time, and this isn’t our first rodeo. Our team of payroll and HR experts can help guide you through the process. We’ll let you know exactly what you’ll need to do. They work hard to make it easy.