Why Purchasing Payroll Services is One of The Cheapest Way You Can Save Big Money
I know. I know. I know.
You are a small business owner and you need to save money every possible way. But let me tell you ONE thing that could very well save you thousands of dollars.
If you are going to put people on payroll (vs. farming out work to freelancers), you absolutely MUST hire a payroll company. Why? Because payroll is so $!&*&%&*%^ complex….. if you make one innocent error you could end up the “penalties and interest” creek without a paddle.
Why is payroll so complex?
Let’s just start with a rudimentary question….is the person you are hiring a subcontractor/freelancer or an employee? You may think this question has a simple answer, but the IRS has a whole document devoted to just this one question (not to mention it’s a WHOLE other article). When you hire your first peeps, save yourself time and money and consult your team of professionals (accountants, bookkeepers, HR experts and/or lawyers) to make sure you are in compliance.
Okay – easy peasy Justine…I figured out who is legally an employee, and who is legally a freelancer. BIG DEAL, SO WHAT?!?!
Hold up…big deal? So what?
Go on then….”run” your first payroll on your own. First, you can’t just run it when you want to (at least in NYS), you actually have to establish consistent pay periods. Then you have to calculate, withhold, and then remit into SIX different tax pools for JUST the federal side. In NYS and NYC, we add in another 3 different tax pools, not to mention having to get disability and workers comp policies. So in NY I have to make sure my ducks are in a row….in 11 different places. It isn’t easy, and mistakes are costly. The good thing about a good payroll company? If they make an error (which isn’t likely), they will likely cover those penalties and interest costs.
I have seen business owners receive penalties for TEN THOUSAND DOLLARS for not having the right pieces in place around payroll. By going the “cheap route” and not hiring a payroll service, those business owners ended up paying out the wazoo, and eliminating the small profit margins they worked so hard for. I
There are a number of payroll providers out there, and I have used them all. I consistently turn to ADP (and YES I do receive some token compensation from them for referrals). You accountant may be able t provide these services also. One thing I would ABSOLUTELY stay away from is other sorts of businesses providing these as “add ons”. Banks are NOT payroll service providers. Neither are makers of leading accounting small business software. These companies don’t specialize in payroll services, and when they make inevitable mistakes the customer service leaves much to be desired.
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