Introduction
Even the most meticulous and experienced business owners find that payroll can be a headache. Slap on a stiff penalty for a tax filing omission, and now we're talking a full-blown financially-induced migraine.

For many businesses, payroll services offer an attractive and valuable alternative to in-house processing. Chosen correctly, they provide a less expensive, simpler means of paying your employees, filing your taxes, and performing a host of other duties these companies' sales reps can't wait to tell you about.

Companies often initially process payroll themselves for any number of the following reasons:

• they consider in-house processing to be more cost-effective than outsourcing
• they are protective of wage information
• they want to maintain control over payroll data to handle last-minute changes.

In truth, smaller firms with a stable, salaried staff and minimal changes in tax obligations may well be better off processing internally; it can certainly be more convenient and efficient if your needs are straightforward. But many ultimately discover it's not all that cheap -- especially when you factor in the time spent managing the process.

Plus, without the proper knowledge of payroll procedure and access to a sound payroll program, it's easy to make mistakes. Employees as well as federal, state, and local tax collection agencies need to be paid in full, on time, and in the proper manner. Usually, late payments are cause for monetary penalties.

Finally, using a payroll service can ease your mind. The Internal Revenue Service has reported that one out of every three employers has been charged for a payroll mistake, with total penalties reaching into the billions of dollars. And given the ever-changing nature of tax regulations, it's easy to make an error that can grossly affect your bottom line. 

When to outsource

While the majority of U.S. businesses process paychecks internally, this is not always cost-effective. At minimum, internal payroll processing requires the purchase of a computer or manual accounting program and extensive training to use it. In addition, businesses need to keep up to date on changes in personnel, deadlines, and tax requirements on an ongoing basis.

Using a payroll service generally makes sense if your payroll changes with each pay period. If your company has employees working varying amounts of hours each week or has a significant turnover rate, a payroll service can be a time-saving and cost-effective alternative to internal processing. Using a payroll service can also be helpful if you have to pay payroll taxes for multiple states.

On the other hand, if your payroll expenses are quite stable, you may find handling payroll internally to be just fine for your needs.

Relaying information
Each pay period, payroll data has to be "called in" to the service provider. This is typically done via fax or email, or phone.

A fax machine eliminates scheduling conflicts and miscommunicated facts, but can bring up security risks concerning who receives the faxes and who will oversee the fax being sent.

Nietzke & Faupel, PC, Payroll Services
Our payroll company's basic services include calculating payroll and tax obligations for each employee, printing and delivering checks, and providing management reports. Paychecks can be issued on a weekly, bi-weekly, monthly, semi-monthly or yearly payroll basis.

In addition, Nietzke & Faupel, PC can offer services such as direct deposit of checks, completing quarterly and annual payroll returns, and issuing W-2s.  

Should you consider outsourcing your company’s payroll work?