Payroll

The good news? Your small business has grown enough to hire a staff. The bad news? You have to figure out how to pay them. There are two main choices for small businesses when it comes to handling payroll: handling payroll in-house or outsourcing using an Internet payroll service or a third party ( like ADP ) to handle payroll entirely.

If your business only employs a handful of people, handling payroll in-house is likely your best bet. The main risk with in-house payroll is that it is necessary to have the job performed by an employee who truly understands the payroll function and who has a clear understanding of which deductions are pre-tax and which are not. The penalties and fines that can be incurred by making mistakes in these areas could far outweigh any money you are saving by performing the duties in house.

However, as your business grows, the time spent managing payroll requires may be better spent in other areas. Internet services will perform some of the tasks for you, like calculating taxes and deductions for health insurance and other withholdings. With an online payroll service, you must still enter data but once entered the service automatically calculates, deducts, pays and files all federal, state, and local taxes. Paychecks can be printed on your laser printer or can be routed to your employees' bank accounts via direct deposit. W-2s are automatically prepared at the end of the year. The key benefit of online payroll is enhanced control. A third-party service will do

When deciding whether to do payroll for your small business in-house or whether to outsource there are several aspects to consider. Much will depend on the size of your organization, i.e., the number of employees, and the size of your budget. While doing payroll in-house may be time-consuming, outsourcing the payroll can be much more expensive.

Regardless of the system you choose, according to the IRS, the employer is ultimately responsible for the deposit and payment of federal tax liabilities. Even if a third-party is making the deposits, the employer is the responsible party. If the third-party fails to make the federal tax payments, the IRS may assess penalties and interest on the employer's account. The employer is liable for all taxes, penalties and interest due. The employer may also be held personally liable for certain unpaid federal taxes so be sure to choose a service provider that uses EFTPS (Electronic Federal Tax Payment System) so that you can confirm payments are being made accordingly.

Features

• Time Entry
• Tax Rate Calculations and Payment
• Computer Printed Checks
• Direct Deposit
• State and Federal Withholding
• Reporting

Considerations

• Integration with Accounting Software

  The accounting system will need to reflect payroll expenses and taxes so you will want to ensure that the payroll software is compatible and will send the appropriate level of detail.

• Payroll Detail

  Since many outsourced payroll systems can't break down payroll by job number, or project, in-house payroll might be a better solution. It can be time consuming however, since data will have to be input manually. Some programs, like QuickBooks, however offer a downloadable payroll feature that allows you to manually input job/project costs and still outsource the payroll itself.

Implementation Options

For more detail evaluating in-house vs. Internet service implementation options see the guide In-House vs. Internet Services (SaaS) vs. Managed Service Provider (MSP) .

If your company does not have the manpower to handle in-house payroll, outsourcing it to a third party might be the best choice. Outsourcing allows your company to provide employees with electronic deposit, which is a real convenience and virtually eliminates the need to write checks. For larger companies - with 50 employees or more - outsourcing is likely a good option as it will allow you to integrate key HR systems, such as health coverage and 401k deductions, into your payroll system.

	1. In-House Payroll Software	2. Internet Payroll Service
Find Local Tech Specialists Search TechShortcut's tech profiles for specialists in your area	Payroll Software
Find More Information Use Research Helper to find related web articles	Payroll Software	Online Payroll Service
Examples of Products and Services These are not endorsements, simply some product or service names we encountered in our research to get you started finding your best fit.	Intuit Payroll for QuickBooks	Intuit Online Payroll Paychex PayCycle