Payroll Scares Me

Hopefully, at some point, growth-minded entrepreneurs need help running their business. Maybe they can use contractors for some tasks, but they will need employees when they grow to a certain level.

And employees expect to be paid, which is not as simple as paying a contractor.

There are two paths a business can take when they need to pay employees.

Option 1: Run payroll in-house

In this scenario, an employee or the business owner calculates payroll, distributes payments, pays taxes, and files payroll returns. Maybe with the help of software or a bookkeeper. This method can be tempting as it avoids additional costs (unless they hire a bookkeeper to help). And in my view, a reasonable task if the business only has one or two employees. With a few employees, it may take about an hour a month for routine payroll tasks. This is assuming the person responsible is familiar with payroll calculations and tax requirements.

However, once the business has more than three employees, I suggest they implement option 2.

Option 2: Sign up with a full-service payroll processor

With full-service payroll processors, the business is responsible for entering the hours, verifying salary paychecks, and updating employee records. But the payroll service calculates the paychecks based on the most current payroll regulations, distributes the payments to employees, pays the payroll taxes, and files the quarterly and annual returns.

And as the payroll grows, few changes are required to keep the system working smoothly.

There are many payroll processors for companies with less than 50 employees. Costs vary; however, they are generally less expensive than having a contract bookkeeper or accountant handle payroll. Or spending an employee’s time on tasks that can be easily outsourced.

If my bias is unclear, I am pro full-service payroll processors. If a business has only one to two employees now, but the goal is to grow, setting up a good system while small can make that aspect of the business’ growth smoother.

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