Payroll is one of the most important functions a business is responsible for, and it is critical to make sure it is done correctly. As such, many businesses choose to either outsource the process to a third party firm or use payroll software to streamline the process. Below are some things you should know about both options.
Choosing Payroll Software
Software for payroll comes in two varieties, which are desktop and online. With online software, you would typically access a secure server or cloud where the payroll data would be entered. Then the software would perform the necessary calculations for the taxes and salaries. Checks can then be printed out or payments transmitted to employees through direct deposit. Tax rates are automatically updated and all the payroll data will remain inside a cloud. Some programs will even file and deposit taxes on your behalf.
Payroll desktop software is installed directly onto your computer. You would enter payroll data into it and like online software the desktop software would perform all the necessary calculations for salaries and taxes. The space on your hard drive will determine how much data can be stored and you must update the software to reflect changes in tax law.
The biggest advantages of payroll software are cost, convenience and peace of mind. The calculations are done for you, and unlike accountants or payroll firms, it is very affordable. Since you still control the process you don’t have to worry about the trust issues and liabilities that can emerge when hiring third parties to perform it on your behalf. In other words, this software gives you all the benefits of an accountant without the disadvantages, but some payroll software tools have a high learning curve.
Outsourcing Payroll To A Third Party
Third parties that specialize in payroll typically come in two forms, either service companies or accountants. Service companies can handle your entire payroll or only a part of it. You provide them with the data and then they process it, print out the checks and mail them to you, after which you transfer them to the employees. Accountants can also handle a portion or the entirety of your payroll, but you would typically be responsible for recording the payroll data while they would process it, making the calculations for the deductions, overtime and employee payment.
The main benefit of using a third party to process payroll is that they handle all the leg work, and remain abreast of any and all changes that occur with payroll or tax law. This gives you the time and energy to focus on other things. The downside to hiring a third party is that they tend to be quite expensive, much more so than using payroll software. You also lose control over the process. It will be difficult to thoroughly monitor them and as such you must trust that the accountant or firm does its job. If they don’t, it will be your business, rather than them, that will face the consequences.