Let’s face it, there isn’t a single payroll solution that works for every company across the board. There are many factors that go into making the best decision, ranging from company size to industry. In fact, even once you’ve narrowed it down to a single method of processing payroll there are still dozens of businesses and resources to choose from, so it isn’t difficult to find yourself using a means of processing payroll that is not the most efficient for your business. However, it’s important to consider all options to make sure you’re using the best method for your company. Here is a list of factors you should consider when narrowing down your payroll method, followed by a quiz you can take that’ll help you make that decision.
At the end of the day, there are four methods of payroll processing that most companies can utilize effectively and efficiently: Processing in-house, using a web-based payroll software, processing through your bank, or trusting an accountant or certified public accountant (CPA) to process for you. Once you know your options, you can consider the factors listed below and make an educated decision on what you should be using. Keep in mind that just because your company has always done payroll a certain way, that doesn’t mean it’s the most efficient or cost effective. Having an open mind when considering your payroll processes is important to ensuring that you’re making the best decision for your organization.
Probably the most basic factor in deciding what payroll process you should be using is your company size. If you’re self-employed than having a web-based payroll software is probably going to cost more than it is worth. However, on the flip side if you’re company has 300+ employees it is going to be very difficult and time-consuming to process payroll in-house. However, what if you fall someplace in the middle? Also, consider how many 1099s do you work with. Your company may be staffed with 50 people, but if not all of them are employees you’ll want to factor that into your decision-making process. If you’re unsure of the difference, check out this blog about How to Determine if an Employer/Employee Relationship Exists.
Every once in a while businesses can collaborate through specific banks that will run their payroll for them. If yours offers such service I encourage you to look into it because this can often be the best case scenario. However, this is rare and doesn’t work for every company. Similarly, if you have a trusted CPA or accountant who you already work with, they might be able to process your payroll for you as well. The time and monetary cost for this will vary from accountant to accountant, so if you’re interested in pursuing this route, explore other options as well to make sure you’re making the right decision financially. However, if the cost is reasonable, this can be an excellent option because you already have a relationship with the person/organization and they are familiar with your business and expenses.
Similarly to size, the number of locations your company holds can have a large effect on what payroll process you should be utilizing. If your business resides in one building or has a few buildings scattered around one central location, you’ll be okay with any of the payroll options we’ve discussed. However, if you have buildings in different states, it’s going to be very difficult to process payroll with any service other than a web-based provider. Tax laws vary from state to state and utilizing a payroll provider is your best bet when it comes to avoiding compliance penalties and fines from the IRS.
Payroll processes can vary from being quite simple to incredibly complex. For instance, if your company has mostly part-time workers with set schedules and offers no benefits, you won’t have to worry about Department of Labor overtime exemption laws or having any sort of timekeeping and benefits administration software. However, if you have a multitude of full- and part-time employees working a variety of schedules and whom you offer health benefits, time off, and retirement plans, you might not want to tackle that all on your own. Sometimes the intricate details can even be too much for an accounting service, so using a payroll provider is your best bet. Keep in mind, even if your payroll is relatively simple, processing in-house probably isn’t your best bet if you find you’re seeking help with even the most basic of payroll and HR related issues.
Time & Money
Sometimes even if all other signs point to you processing payroll in-house, you simply do not have the time to do it in-house. Assuming using a bank, accountant or CPA are not options, consider it this way: if you find you have more time than money, considering running payroll in-house can be a good way to go. However, an important misconception that’s worth discrediting is that web-based software costs more than processing payroll in-house. This is especially true if you run your business in a “time is money” type of way. However, here at Dominion we will take care of all your local, state, and payroll taxes while running your payroll, and will absorb any tax penalties that might occur along the way.
If you’re still uncertain which method best works for your company, take our quiz to help you figure it out.