Payroll processing costs in 2024 have remained relatively stable compared to previous years, unlike the significant increases seen in other areas such as food, insurance, and labor costs.
There are two main approaches to payroll processing: do-it-yourself (DIY) solutions and full-service payroll companies.
Read on to learn about each set of costs and benefits.
DIY Payroll Solutions
DIY payroll solutions, like QuickBooks Online and Gusto, are generally the lowest-cost option. These platforms provide the tools necessary for payroll processing, but you are responsible for managing the entire process. This includes loading data, tax filings, and managing any issues that arise.
DIY solutions require significant time and attention, as you essentially "babysit" the system to ensure everything runs smoothly.
Full-Service Payroll Companies
Full-service payroll companies, such as ADP, Paychex, Paylocity, Paycom, and even Baron Payroll, offer more comprehensive support.
These companies provide customer support, training, setup, and configuration services. However, the quality of service can vary.
Some companies may not be as responsive, or their staff may lack the necessary expertise due to being overworked. When choosing a full-service payroll company, it’s crucial to select one that prioritizes your account and offers a dedicated representative.
Cost Models: Per Transaction vs. Per Employee
There are two main pricing models for payroll processing:
- Per Transaction Model: You pay a fee each time you run payroll.
- Per Employee Per Month Model: You pay a flat fee per employee each month, regardless of how often they are paid.
While the per employee per month model may seem straightforward, it can become costly if you have high employee turnover or part-time employees. The per transaction model often proves to be more cost-effective and fair for businesses.
The Benefits of Professional Payroll Services
Hiring a professional payroll service is akin to hiring an accountant for your tax returns. While DIY payroll may seem cheaper upfront, mistakes can lead to costly consequences.
Errors in payroll can result in Department of Labor investigations, penalties for late tax payments, incorrect tax filings, and lawsuits from employees.
These issues underscore the importance of having an expert handle your payroll, ensuring compliance and avoiding potentially expensive mistakes.
Payroll Services for Small Businesses
Small businesses often view payroll as an area where they can cut costs by doing it themselves. However, payroll is a minefield of potential issues. Payroll mistakes can lead to significant financial penalties that could outweigh the cost of hiring a payroll service.
Given the constantly changing landscape of tax regulations and wage laws, having a professional service manage your payroll is highly beneficial. It ensures you stay compliant and avoid costly errors.
Common Payroll Mistakes and How to Avoid Them
Here are some common payroll mistakes businesses make:
- Inadequate Pay Statements: Employees must receive detailed pay statements showing gross pay, tax deductions, and itemized deductions.
- Incorrect Tax Payments: Taxes must be remitted on the correct schedule. Failing to adjust for changes in withholding thresholds can lead to penalties.
- Minimum Wage Compliance: Stay updated on changing minimum wage laws, which vary by state and industry.
- Poor Timekeeping: Maintain detailed time records, whether manually or electronically, to ensure accurate pay.
- Incorrect Tax Withholding: Ensure the correct amount of tax is withheld based on the pay frequency to avoid over or under-withholding.
Solutions for Frequent Errors and Delays
To avoid payroll errors and delays, consider the following:
- Automated Systems: Use modern time and attendance systems to track employee hours daily, reducing last-minute issues when processing payroll.
- Check Print-Back: Implement check print-back systems to avoid delays in check deliveries, especially during adverse weather conditions.
- Regular Review: Regularly review employee hours and payroll data to catch and correct errors promptly.
And that's it!
Payroll processing in 2024 is relatively inexpensive and can save businesses significant time and resources. Whether you choose a DIY solution or a full-service payroll company, understanding the costs and benefits is essential. Professional payroll services can help avoid costly mistakes and ensure compliance, making them a worthwhile investment for businesses of all sizes.
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