Maintaining tasks related to payroll for both big and small-sized companies can always consume a lot of time and so many business owners outsource such tasks to payroll companies and have them handle the job. These companies works in compliance with all the applicable laws, keeping the employer out of any kind of trouble.
Handling the payroll of each and every employee can be confusing and time-consuming at the same time. As the business expands, it is necessary to have at least one employee who must take the responsibility of payroll management. You can also go for a cost-effective alternative for this in the form of outsourcing.
What Is Payroll Management?
Payroll is the amount of all financial records for an employee, including salary, wages, bonuses and deductions. When put in simple words, payroll refers to a particular sum paid to an employee during a certain period of time for the services that he has provided. Payroll management is a multi-step process and involves calculating wages, printing and distributing checks, setting up direct deposits, signing checks, deducting taxes and pre tax deductions like health care.
Taxes And Deductions
The taxes deducted from the checks of full or part-time employees may differ from company to company. There are federally mandated taxes for medicare and social security that are deducted from the amount dictated by a worker’s salary. Other deductions may include health care.
Having Cash On Hand
In early stages of your business, you may face a cash crunch and may find it difficult to cover payroll of employees with your own funds. Running out of sufficient cash to meet your payroll can create a big problem for you. To keep yourself protected from such trouble you need to focus on collecting unpaid accounts to manage your cash reserves for paying your workers. This is the time to realistically assess the short-term future of your business.
Needless to say, in the absence of meeting the payroll, employees, especially newer and lower-level workers will create defections against the company. This is quite normal and you should not be surprised with it. It is important to note that the company may represent your lifelong dream, however it is not necessary that all your workers feel the same too.
Payroll management is a complicated and time-consuming task. It is usually cheaper to outsource someone instead of hiring an expert to take care of it in-house. This is why a lot of companies switch to specialized payroll firms to handle the job. Although, there are a few factors that support your decision of outsourcing someone for payroll management:
1. If your wages are consistent, for instance, if there are many employees at same salary in your company for quite sometime, with no plans to change, then payroll management must be automated. There are several software programs available that can help you with this.
2. Freelancers or part-time employees mix things up a bit as their working hours as well as wages can vary week to week. Different tax rules may also apply in this situation.
3. Having a large turnover can make it quite difficult and time-consuming for filling the paperwork every time a new employee is hired. An experienced payroll management company can do this for you rather efficiently and effectively.
4. Generally big companies pay federal and state taxes quarterly. However, small businesses only need to pay annually, as per their size as well as state’s regulations. A payroll venture aids to figure out these payments, by charging you some extra bucks.