A business gets started because of specific industry expertise and passion, yet most business owners are not experts in payroll services and human resources (HR). Determining a payroll and HR solution are part of a strong risk management business strategy. Being an employer has become more challenging as legislation and tax laws continue to change.
Do it yourself
The typical roadmap is that when a company emerges, payroll and HR are done by the business owner. A business owner can very effectively do payroll in Microsoft Excel, through a subscription service like Intuit Online Payroll or a similar low-cost program. As a company grows, these responsibilities begin taking valuable time away from core business issues, so a trusted advisor is often employed. The payroll processing burden now shifts to a CPA, Bookkeeper, or Office Manager. In this case, the task has moved from the business owner to another entity; however, processing payroll services are usually not their core competency, and other issues related to HR remain on the business owners’ shoulders.
Employ a trusted advisor
As growth continues, it is often more cost-effective, efficient, and provides greater risk management for seeking specific expertise in payroll and human resources through an outsourced business model. One solution is to outsource payroll only, and the other solution is to outsource both payroll and human resources in an integration of services through a Professional Employer Organization (PEO). There are several national payroll services providers like ADP and Paychex, and many local providers in nearly every market. These types of companies process a high volume of paychecks, but may not have the desired high-touch customer service and high-level HR expertise.
Outsource payroll only or outsource an integration of HR services and payroll
A key differentiator between those who go to market as a payroll processing company and a Professional Employer Organization is that PEO’s have “skin in the game,” so there is a laser focus not only on payroll services accuracy and high-touch customer service, but also expertise in managing HR. In addition to processing payroll and tax administration, PEO’s offer much more in terms of employer services, including human resources, compliance support, employee benefit programs, 401k, and workers’ compensation. Since business owners often don’t have time to proactively manage day-to-day human resource administration, systems, and strategies, PEOs offer a tremendous compliment to processing payroll.
PEOs have a real incentive to keep up with compliance and to ensure payroll is processed accurately because of the amount of legal responsibility they have in the relationship. This offers business owners “peace of mind” knowing that they don’t have to worry about the employment side of the business and can focus on the operational and strategic side of the business.
The decision of how to implement payroll services and human resource functions will be different for each company; based on size, growth projections, time, skill-set, and revenue. Thankfully, there are a variety of choices in the marketplace for business owners. Mistakes completing and processing state and federal forms can be time-consuming and result in unnecessary financial penalties.