Payroll serves a critical cash flow function for you, and its importance to your employees is obvious. Happy employees are the ones who get paid right, on-time, and predictably. But whether you’re a solo operation or a medium-sized business with a dedicated payroll staff, it’s easy to make mistakes that cost time, money, and morale.
One of the many key services professional employer organizations (PEOs) offer is handling payroll -- and a brief look at some of the most common issues with payroll shows why so many small- and medium-sized business owners are relieved to unload the responsibility on a trusted partner.
Taxes, Taxes, Taxes -- and Penalties
The most complex part of generating accurate payroll is meeting your many tax obligations. You’ve got to deal with federal, state, and local taxes for your sake and your employee’s. And nearly half of small businesses pay penalties every year for payroll mistakes.
The real problem with penalties is clear, but the time it takes to fix payroll problems -- not to mention the frustration -- can add up fast. Looking for an outside payroll solution saves many businesses both dollars and headaches, especially when it’s bundled with other useful services.
With near-constant changes to taxes at the federal and state levels, it’s important to recognize when payday shifts from being a happy day for your employees to a major liability for you.
Misclassification of Employees
Are the people who work with you employees, or are they independent contractors? It might feel the same to you, but it makes a big difference to the government.
It isn’t always easy to figure out where a worker fits, and as more businesses look to working relationships with far-reaching talent and with flexible rules, it’s easy to make a mistake. Your PEO will help you determine how to classify your employees so no one has to deal with a difficult error.
A Million 1099s and Counting
With more independent contractors in the marketplace and a host of vendors for seemingly every need, 1099s can pile up throughout the year. Not issuing a 1099 properly and on time creates a problem for you and the recipient. PEOs can handle your mountain of 1099s to clear one more burden off your heaping plate.
Bonuses, Gifts, and Taxable Fringe Benefits
Failure to include a range of taxable income can spell misery for you and your employees. It feels great to give a hard-working employee a bonus -- and they won’t complain! -- but the feeling isn’t as sweet for anyone when it becomes a hassle. Some gifts are taxable; others aren’t. Fringe benefits like spouses tagging along on business trips or the use of a company car can be difficult to value and report. If you aren’t comfortable sorting out the rules, regulations, and exceptions, it’s best to leave it to a professional who will know exactly what to do.
… and Everything Else
Simple informational mistakes that turn into a nightmare. Overtime miscalculations that ding you or your employees. Missing regulatory changes or failing to post required notices.
Unfortunately, it’s not a short list, and even the most attentive business owners can make a misstep that creates a difficult, expensive situation for you or the people who make your company function.
You don’t have to do it yourself -- and a PEO can handle payroll flawlessly in your customized package of bundled services to ensure that your company avoids problems and maintains a focus on what you do best.