Payroll services are perhaps one of the most daunting tasks for service professionals and small businesses. From palling around for work receipts, providing paystubs, and then the actual paying. While the actual payment can be swift and harmless, the necessary documentation can be a hassle. This is a time-consuming task that has no business with service professionals and small businesses. However, sadly it is part of the job. Having a fundamental understanding of payroll services as a startup business or service professional will help you save costs and time processing one.
What is a payroll service provider?
Payroll service providers (PSP) are third-party tools or companies with the responsibility to perform certain payment tasks for a business. These include the administration of payroll and employment task obligations. Payroll service providers typically offer the following services.
- Prepare the paychecks for the employees of a business
- Put together paystubs
- Create Forms 940, 941, 1009, and Employer’s Annual Federal Unemployment (FUTA) Tax Return
- Employer’s QUARTERLY Federal Tax Return using the employer’s EIN for signature by the employer.
- File Forms 940 and 941 using the employer’s EIN.
- Make federal tax deposits and federal tax payments for the taxes reported on Forms 940 and 941 using the employer’s EIN.
- Prepare Form W-3, Transmittal of Wage and Tax Statements, and file and furnish Forms W-2, Wage, and Tax Statement, for the employees of the employer using the employer’s EIN.
Types of payroll systems
Software Managed Payroll Systems
Software-managed payroll systems are one of the cheapest ways to create financial documentations. They are easy and quite fast to use with growing technologies. Websites like Paystubsnow help you create Check stubs, 1099, invoices, and various other financial supporting documents without needing payroll service companies. However, using this method requires that you have a basic knowledge of payroll management. Typically you will have to manually enter employee details into whichever payroll software you use. This will also require you to keep your record of employee details such as hours logged, hourly rates, and others.
Professionally Managed Payroll Systems
Professionally managing your payroll system requires you to hire virtual bookkeepers or accountants. With freelance service professionals out there, you can easily hire one on a contract basis. This is probably the second less expensive method for small businesses. This way, you only have to pay when you need the job done. If you do your books once a month, that would mean having to pay just once a month as well.
Internally Managed Payroll Systems
An internally managed payroll system is for small businesses with medium-sized employees. This method of payroll management is also sometimes combined with a software payrollee system. Since the number of employees is mid-range, you can easily compile and create the necessary documentation yourself while also relying on a few tools for creating invoices, paystubs, and others. As a solopreneur, this is also one of the best methods for your business. You can generate unique and customized invoices, create paystubs, 1099, and more all by yourself.
Payroll Services Managed by Payroll System Agencies
This is typically the service hired by big companies for their payroll need. These agencies cover everything from generating paystubs, applying deductions, taxes, and paying employees. This is perhaps the most accurate form of payroll system but also the most expensive by any standard.
Should I hire payroll services?
Hiring a payroll service can either be by hiring a payroll agency or an accountant. In both cases, your business has to be at a certain level. If you are a growing business with a sizable number of staff, hiring a payroll agency might prove useful if you don’t mind the cost. However, if you are a small business with just yourself or fewer employees, hiring a payroll service isn’t necessary. Simply use an internally managed system, software, or both. This will save you cost while also giving you optimal value.
How much does is the cost of hiring payroll services?
While there are a lot of variables to consider for the cost of hiring a payroll service, a few things are accurate. Depending on your state of residence, the number of employees, payment frequency, and some other factors, hiring a payroll company can cost anywhere between $25 -$250 per month. Considerably less when using software or internally generated service.
Can I do payroll myself?
The whole point of using internal or software Payroll service is so you can make payroll services yourself. With service providers like paystubnow, creating supporting documents for payroll is as fast as it is easy.
FAQ: Payroll meaning
Payroll is an accurate list of a company’s employee database. This is a list of everyone in the company who gets paid. This can also mean the total amount a company pays out on a monthly, weekly, or biweekly basis.
What is payroll processing?
Payroll processing job is the process of calculating employee wages, deductions, delivering payments, and filing taxes. You can choose to do this manually through any of the payroll processing types. These include software, internal management, payroll service providers, and professional payroll management.
Payroll services for small businesses
As a small business, you want to choose a payroll service that will save you cost. Depending on your payroll, manually creating one will be more financially wise. However, this method takes time. If you have a payroll of between 3-15 employees, using software or service providers such as paystubsnow will be more effective.