Is it time for a payroll service?

Dustin Johnson
By Dustin Johnson

Congrats! You’ve hired your first employee. When you’re starting out in business and have just one or a handful of employees, it’s tempting to manage payroll on your own. It can seem like a cost-savings. If you’re detail-oriented and have time for the task, there’s no reason you shouldn’t manage payroll on your own. But if you’re wondering about the many payroll service options and the pros and cons of getting a service to handle your payroll, read on.

Know the rules

If you’ve done even one payroll, you know that while it’s not difficult, per se, it can have a lot of moving parts. Are you withholding the right amount of federal, state, and local tax? Are you withholding the prescribed amount for health insurance? Is your employee covered as an individual, or do they pay all or part of their family coverage through payroll withholding? If you’re the kind of person who can keep details like these straight, you may save some money by doing payroll yourself. Keep an eye on the number of hours it takes you each week to keep track of all these specifics. Then do the analysis of whether that’s the best use of your time, or if those hours could better be spent on marketing, sourcing new products, or working on your company’s social media presence. Owning a small business means having a lot of demands on your time, and being methodical in how you allot it.

Have you hired from out of state?

When you hire an employee in another state, you add a layer of complexity to your company’s payroll. It’s the way of the world in these virtual times. But it does mean keeping track of rules from another jurisdiction. It may not just be another state, but another municipality as well. When your company is expanding to the point where you may want to hire talent from outside your general area, you may want to weigh how much time those new tax rules are going to add to your payroll process, and possibly price help from a service.

Consider what your employees want

It’s likely that many of your employees have come from a larger, corporate employer with a payroll service that offers such conveniences as a portal for easy download of paystubs, tracking of vacation time earned and taken, digital W2s, and a simple way to update personal information and tax withholding status. When you calculate how much time you spend on payroll, consider what you spend manually responding to employee requests such as these. You may want to chat with employees and understand how much of a pain point it is not to have a payroll portal to turn to for simple requests.

|Doing payroll manually may be feasible in a small company with a handful of employees. If your business plan calls for scaling beyond this, you may want to consider a payroll service.

Think about how much you expect to grow

Doing payroll manually may be feasible in a small company with a handful of employees. If your business plan calls for scaling beyond this, you may want to consider a payroll service. It’s not that it’s impossible to do payroll for a larger workforce. But as you add employees, you add time and complexity to the calculation of payroll tax, vacation time earned and taken, and reporting to tax authorities. Keep a close eye on the creep of payroll responsibilities. If you find yourself starting to burn the candle on both ends to get payroll done on time, a payroll service may get you back precious time to work on your business or even rest up to be at your best. 

Consider ease of integration with other apps and tools

Another benefit of getting payroll done with a service is that, depending on the one you choose, you may be able to have it seamlessly integrate with your bookkeeping and other tools you use to manage your business's cash flow and accounting.

While you work to free up your time and energy by outsourcing payroll to a service, also consider building out your online tools by adding ComplYant, which helps you stay on top of tax filing deadlines. Never miss another tax deadline, and stay on top of important dates so you can avoid unnecessary penalties and fees.

Dustin Johnson
By Dustin Johnson
Dustin Johnson is a Senior Tax Research Specialist at ComplYant. Prior to joining ComplYant, he spent over eleven years performing tax research at the world’s largest tax preparation company. Dustin holds a Bachelor of Business Administration and a Juris Doctor. Outside of work, Dustin enjoys biking and spending time with his family.

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