Outsourcing Payroll a Solution to Growing Complexity
Knowing the Tax Rules of All 50 States
Payroll is rarely a simple matter in today’s business world. Gone are the days when the boss or the company controller wrote checks to each employee on payday. Payroll complexity is on the increase, and companies looking to outsource their payroll functions must consider many factors when choosing a payroll provider.
Smaller businesses often are tempted to outsource their payroll to a growing number of cloud-based providers who offer low-cost services. Typically, with these services you log in to a portal and upload the payroll data yourself, and if a question arises you call an 800 number that connects you with a representative who, most likely, is not located in your state. There is no advice or guidance and no knowledge of your company or your state’s tax rules.
While this model offers cost savings, the savings come at a cost.
Payroll today involves many variables that change from company to company and from employee to employee. Wages, state and federal tax withholding (and in some cases municipal tax withholding), retirement plan salary deferrals, “cafeteria plan” elections and other factors are different for each employee, and mistakes in tax withholding and employee benefit plan deferrals can result in hefty penalties for employers.
Adding to the complexity is the growing trend toward virtual and hybrid work arrangements, which in some cases mean employees live in a different state than the employer. Numerous states and cities across the country have enacted minimum wages that are higher than the federal minimum wage. Employers must correctly withhold state income taxes, unemployment insurance contributions and other compliance payments for each state in which they have employees.
For instance, if you have employees living in Kansas City, MO, you’re obligated to withhold a 1% earnings tax. Missouri also has a different minimum wage than Kansas does, and tipped employees are treated differently in Missouri. The two states also have different overtime rules.
Full Service Outsourced Payroll
A full-service outsourced payroll provider like Adams Brown offers the benefits and expertise of a CPA firm to back up its payroll services. If you have a question about tax withholding for out-of-state employees, a CPA who is well-versed in the tax rules of all 50 states is available to provide a quick answer. Moreover, a dedicated payroll processor who knows your company and reads your emails will respond to any question you have.
Companies that outsource their payroll often have broader human resources needs, as well. Our digital onboarding system, which enables your new hires to fill out and submit workplace documents online, helps ensure that electronic documents flow automatically into your payroll system. We’ll also forward your employee handbook digitally to your new hires and ask that they acknowledge electronically that they have read it.
Is It Time to Outsource?
Companies often consider outsourcing payroll in response to certain events or needs:
- Your internal payroll clerk or controller is retiring or planning to retire. Planning ahead enables that person to help with implementation during the transition.
- You want to implement a timekeeping system that integrates with payroll
- You want to better administer paid time off benefits.
- You want to move toward a paperless environment where employees can receive their pay via direct deposit and receive pay stubs online.
- Your company is experiencing rapid growth, requiring you to deposit payroll taxes more frequently. Rapid growth means more than just issuing more paychecks; it means more frequent reporting requirements.
Platinum Pay Express
In addition to our customized full-service outsourced payroll services, Adams Brown offers an entry-level payroll outsourcing option for smaller businesses and startups that are keeping close tabs on expenses.
With Platinum Pay Express, you log in to your account and upload the payroll data yourself, but a dedicated Adams Brown payroll specialist will review every entry and make sure the initial setup is correct. Your specialist also is available at all times to answer questions or review any special situations that may apply to your employees. You can also produce any reports you may need.
If you would like to discuss outsourcing your company’s payroll, contact your Adams Brown advisor.