When to Outsource: Payroll

To outsource or not to outsource? When it comes to payroll, Westchester human-resources consultant, educator, and author Greg Chartier, PhD , says outsourcing is well worth the investment, especially to help manage the complexities of a growing business and applicable IRS and Department of Labor regulations. Here’s a primer on getting payroll processing right.

OK TO DIY, IF:

• You’re a sole proprietor.

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• Any employees you have are relatives.

What to Use: QuickBooks Software

Cost: $27 – $57 per month


TIME FOR PROFESSIONAL HELP IF: 

• You have up to 10 employees.

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• You find payroll difficult to manage.

• You need help with IRS tax-compliance issues. 

What to Do:  Engage an accountant. 

Cost: Accountant fees vary, depending on their level  of experience and payment arrangement.


YOU NEED A MORE SOPHISTICATED PROVIDER, IF: 

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• You have more than 10 employees.

• You need to manage multistate tax issues.

• More sophisticated processing is required, i.e., calculation of shift differentials, PTO, and holiday pay.

• You need to file quarterly payroll-tax reports to state and federal agencies. 

• You need help issuing W-2 and 1099 forms at year-end.

• You need to report new hires to the government.

• You want to provide employee self-service options.

What to do: Outsource! Major providers include Paychecks, ADP, and USA Payroll. Options include software downloads or online/cloud-based offerings.

Costs: Base fees range from $20 – $200  per pay period, depending on plan and provider.  Most services also charge between $1 and $10 for each paid employee per pay cycle. Some services offer optional add-ons for services like direct deposit.

Chartier adds that perhaps the best reason to outsource your payroll to a service is that they typically assume much of the liability for tax penalites imposed by the IRS for mistakes.  

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