Have you ever watched MythBusters, the science experiment television show that sets out to test myths and prove or debunk them once and for all? The hosts’ mission is to unveil the truth behind urban myths, folktales, and legends. Well, that's what we're doing in this post! We are debunking eight payroll myths we often hear in our industry. Chances are good you've heard one or two of these myths before.
My business is too small to use a payroll service.
Businesses with even just one employee use payroll services to ensure they are withholding the proper taxes from the employee's pay and filing and paying payroll taxes on time. Many providers offer simple online platforms, service bundles, and pricing explicitly designed for microbusinesses. Some services can also enter hours worked and other data then process payroll for you, known as payroll administration. Others allow you to set payroll to run automatically if the pay rate and hours are the same each pay period.
Handling payroll in-house saves money and time.
Sit down and do the math. You’ll likely find that you’re spending a lot of valuable employee time running payroll every pay period, tracking who took time off that week, reviewing hourly workers’ time sheets, and calculating overtime. Hiring a payroll company does so much more than take care of your paychecks. They help you stay compliant with employment taxes and provide a platform that allows employees to easily check their pay stubs, submit expenses and mileage, request time off, record sick time, and more. The payroll vendor may also offer new hire onboarding tools and everything from background checks to new employee paperwork. Consider the whole package when reviewing pricing, and remember, you’re getting an online payroll platform, a payroll professional, and a tax pro when you work with a payroll company.
See Also: 8 Payroll Mistakes That Could Cost You
My staff can handle the extra work required for processing end-of-year forms.
Talk to your staff about their areas of expertise and comfort levels in meeting local, state and federal year-end reporting requirements for employees and contract staff, as well as their current workload. In this very competitive work environment, your team may need to focus on recruiting, onboarding, strategy and a dozen other tasks that help your company grow and be successful. Expecting them to be tax experts may put them outside their area of expertise and expose your company to unnecessary risk. Spare your team the extra stress and reduce your chances of making critical tax errors by letting the experts take care of your payroll responsibilities.
We don’t need background checks, hiring policies, or onboarding processes - we’re a casual workplace.
The casual work environment is popular right now, and we applaud those who toss out the traditional eight to five work schedule and provide flexibility to their employees. We’re jealous that you have a pool table, and hope our own bosses will soon give us all free pizza on Fridays! Alas, even as a casual workplace, you need to meet basic requirements. A lack of policies could leave you on the hook for damages in an employee or customer lawsuit. For example, if you don’t have a sexual harassment policy, and an employee sues you, how will you show that you had workplace rules to protect employees? Government regulations require that employees understand their rights, and, in some cases, receive accommodations. Smart organizations recognize that a handbook and a consistent onboarding process can protect the company, educate employees, and meet government regulations to help employees understand their rights. Your payroll company and an HR services company can be resources for you as you put these essential pieces in place.
We only use independent contractors, so we don’t need payroll services.
The burden to prove workers are independent contractors and not employees is yours and is getting tougher. Assuming you've gotten over that hurdle, hopefully with the assistance of an employment attorney, independent contractors still need to be paid regularly. You must also furnish them with a 1099 at the end of the year and file them with the IRS. These responsibilities are easily managed through a payroll provider.
Tax rules and regulations don’t change that often.
Local, state, and national policies do change, so there will always be adjustments or even outright replacements to tax rules and regulations. Sometimes tax law changes are retroactive, meaning you have to go back to the beginning of the year and make adjustments. There’s no reason to be overwhelmed; with a payroll provider, you have a dedicated team behind you to keep you up-to-date and in compliance with tax rules. Payroll providers often have contacts at the IRS they communicate with on a regular basis to work through issues on behalf of their clients.
If I use a third party, they won’t understand my business, and I’ll never get the answers I need.
Think of third-party payroll providers as new but experienced employees. You show them around, introduce them to those they will be working with, and help familiarize them with your organization. Once you have processed a few payrolls with your payroll vendor, you should have a good understanding of their processes and your payroll vendor will be familiar with your specific needs. They have the deep expertise that comes from working with hundreds of businesses and can apply that knowledge to benefit you and your organization. Moreover, if you choose a provider that offers one-on-one service with the same individual or team, you'll become very familiar with the folks helping you with your payroll and vice versa.
It’s too painful, expensive and time-consuming to switch to a payroll vendor.
With established onboarding processes and the right online software, the process is much more forgiving than you might assume. Your implementation team does this every single day and manages payroll for a living. Chances are, you are not their first client, and this is not their first rodeo. They will tell you exactly what files and information they need to set up your payroll. Depending on your needs, switching to payroll outsourcing, or switching vendors, can save you money. While saving money is a good reason to make a change, it is also important to consider all the benefits a new system might offer. How can it save you time? Does it simplify things for your employees? Does the provider offer an experienced staff that can help you protect your company? Consider the full value of the service package you are getting.
For more information, see our recommendations in How to Safely Choose the Absolute Best Payroll Service for You and Your Employees. Or visit our resources page, How to Choose a Payroll Service.
If you have myths not addressed in this article, connect with us at firstname.lastname@example.org.