Depending on the nature of a business, managing payroll can range from relatively simple to incredibly complex. However, even the simplest payroll administration still has the pressures involved with payroll tax filings, tracking paid time off and completing W-2s each year. Some businesses manage their own payrolls because they don’t trust the books to an outsider. Others DIY because they don’t want to pay a professional. And many still do their own payrolls because they always have.
“Time is money” and “mistakes are costly” are just two clichés to remember when considering if you should reconsider how you manage your company’s payroll. Here are three more:
1. A place for everything and everything in its place
Handling payroll in-house can be more expensive than outsourcing because proper payroll organization requires systems and processes for managing tasks, responsibilities and deadlines. This can include managing various types of information, detailed filing systems, avoiding clutter, accurate recordkeeping and disposing of out-of-date items. Not to mention, fulfilling the payroll requirements for Paycheck Protection Program loans, or retroactively applying for Employee Retention Tax Credits also require a great deal of organization and additional documentation.
2. The devil is in the details
A small mistake or oversight can be costly. Failing to pay close attention to every detail comes with liability, so no detail is too small. From the proper classification of employees to tax regulations and exceptions to knowing and understanding labor laws, you don’t want to miss important details that keep you in compliance and penalty-free.
This is especially important as more work shifts to remote and employees start to take advantage of new laws for paid family leave and sick days, which is putting increased pressure on already stretched HR and accounting staffs.
3. If you don’t change, you don’t grow
No two businesses are alike, so every payroll is unique. As businesses grow and evolve, so too do their payroll needs. Many companies are redefining roles, work arrangements, pay, vacation and hiring practices. One new trend is the hiring of ‘gig workers’ because it is so difficult to find full-time employees. The payroll and tax implications of determining the employment status of certain employees add a new twist to an already cumbersome process in payroll management.
According to Ted Orban, business services director of H&R Block in Hilton Head, there are two main reasons his clients choose to have H&R Block manage their payrolls. “Our clients want to ‘get it right’ to limit their legal liability. Our clients don’t want to be on the hook for big penalties from the IRS, so the burden is on us to ensure that all labor and tax laws are followed correctly. And most recently, the world has changed so much since the pandemic, from PPP loans to tax credits and time-off requirements, that even the most basic payroll has become more complex. Our clients choose to focus on growing their businesses and want us to take care of their payrolls and associated filings and taxes.”
Ted Orban, business services director of H&R Block in Hilton Head