Though many small businesses prepare their payroll manually, others use payroll preparation services. These services get most of their business from companies with 20 or fewer employees. Using such a service helps you by giving you more time to concentrate on your own business, and maintaining complete payroll records for you. It can also help you avoid tax problems by providing a highly accurate method of payroll preparation.
Information the Service Needs from You
In order for the service to set you up in its system, you will have to provide them with certain basic information, including the names, ID numbers, and pay rates of your employees. You’ll also need to indicate whether each employee wants to receive a check or to have a direct deposit made to his or her bank account.
Each pay period, you will report to the service the payroll hours for each employee. Usually this can be done by phone, fax, computer, or the Internet.
What the Service Does
Pay Employees: Using the hours you report, the service will write (and deliver) checks and/or make direct deposits to employee accounts.
Handle Taxes: The service will calculate, deposit, file, and reconcile payroll taxes.
Produce Reports: Standard reports produced by these services include payroll register, payroll tax summary, month-to-date tax summary, and master list of employee information.
Other Services and Benefits: The service may also:
- Keep pace with federal, state, and local tax changes for accurate on time filing.
- Respond to payroll-related questions that may arise from agencies or employees.
- Process unemployment claims.
- Perform employee background screening.
- Remit Worker’s Comp payments each pay period, eliminating the need for the yearly audit.
- Provide referrals to Worker’s Comp carriers, benefit and retirement plans
- Provide advice on matters of employer and employee rights, and other human resource issues.
- Complete quarterly IRS payroll Form 941 and local tax reports
- Pay any payroll tax penalties that arise from their error.
Set up fees: This fee usually runs about $100, but can also depend on the number of employees you have. Don’t be afraid to ask if the service to waive this fee or the charges for the first couple of payrolls — they have lots of competition, and may be willing to give you a deal to get your business.
Per-employee Rate: The number of employees being processed dictates the rate you pay — the lower the number, the higher the rate per person. Here’s an example of the per-payroll fees for an business with 11 employees that pays its employees every two weeks (bi-weekly schedule).
Basic fee per payroll $33.00
State tax 2.88 (8.75%)
Direct deposit 5.00 (for any number of employees)
Tax payment 5.00 (per electronic deposit, which includes withholding tax, FICA and SSI.
Companies must file semi-monthly, monthly or quarterly depending on their size and age)
Delivery by staff 3.00 (Per delivery of payroll checks, not per person)
Total $48.88 x 26 payrolls per year = $1,270.88
Sample fees for additional services:
Personal delivery................ .6.00
New hires.............................. 2.00 (to set up in the system)
Internet.................................10.00 (per month for portal access, such as e-mail)
Process year-end W-2’s........ 3.00 (per employee)
Thanks to the following firms for providing SCORE with this information.
9215 Middlebrook Pike Knoxville, TN 37923
Phone (865) 691-5123 Web site: http://www.paytimesolutions.com
ADP – Automatic Data Processing
1111 Northshore Drive Knoxville, TN 37919
Phone (865) 588-1050
Web site: http://www.adp.com