Outsourcing Payroll – The Good, the Bad and the Ugly

Payroll is a vital business practice – like sales or customer service. It can be challenging, detailed and complicated with regulations and its rules as well as some mistakes’ consequences could be more serious than an employee’s checks simply being wrong. Many mistakes could result in receiving a very difficult time, not from the workers, but from individuals you already don’t wish to understand – the national and state authorities enforcement types.

While cover services offer an attractive and valuable alternative to in-house processing, this can be true only when chosen correctly and tracked by someone (such as a professional freelance accountant or bookkeeper) who understands the fundamental compliance rules.

When a payroll company is selected correctly, they provide a cheaper, simpler means of paying employees and filing the compliance tax returns each quarter, not to mention protecting you against the liability related to preparing payments, It’s Important to consider:

THEY, the payroll provider, are responsible for calculating pay from the information provided to them and remitting your tax payments and submitting your returns on a timely basis.

YOU, the user of this payroll service (freelance accountants, bookkeepers or business owner) are accountable for: 

Understanding the basic principles of citizenship and requesting the provider the”right” questions about their services as it relates to your company. Keep in mind even if you ask the”right” questions the sales representative, that sets up your accounts and the customer support representative whom you deal with after your account has been set up, may not have the correct answers however large or small the company! Here’s an example of a that ended up costing a client of mine almost one-hundred million bucks. PEO Canada: Outsourcing in HR & Outsource Employer Services

When we began working with a new customer last year who has a particular, complicated payroll we uncovered they weren’t making Medicare donations. This company had been in business for many years and has been using an organization to process their payroll. Not once through the setup of this company or processing was the question ever raised by the payroll provider” that you aren’t contributing to Medicare”. The payroll was only processed!

This oversight led to our customer being out of compliance with the Federal authorities and whenever you’re out of compliance for taxes you’ll go to jail. We assisted our client to take immediate actions to rectify this issue and while everything has been resolved together with the authorities it should be understood the company who processed the payroll and set-up has obtained no obligation for this oversight. Obviously, providers have changed.

Knowing exactly what services the payroll provider works for you and the way those services affect your cash flow. For instance, does the support you choose debit the internet pay and taxes amount from your checking account or perform these numbers in your own bank account? Another client of mine thought that the payroll company has been making the tax payments and filing the tax returns with the authorities. This was not true and my client ended up paying penalties and interest.

Gathering and communicating the information needed to accurately calculate your payroll. This includes hours, new hire information, employee change information, properly classifying your employees as exempt, non-exempt, correctly employing overtime rules, etc..

With payroll companies today supplying an internet option for the ease of processing, the burden of inputting information accurately and properly belongs with all the business owner or the bookkeeper performing this job in their behalf. Mistakes can lead to additional processing fees being billed.

Reviewing the processed payroll and accounts for accuracy and completeness. Even though you’ve hired the company to process the payroll and they’re the”pros”, it’s still your responsibility to have a basic understanding of rules and regulations. I cannot tell you how many times our clients have hauled their new nation unemployment contribution rate and that information wasn’t upgraded or federal unemployment taxes being taken out past the limitation of $7,000 or $56 per worker. You are always saved money in the long run by being knowledgeable. PEO Canada

Here are a few hints I’ve developed over the years that have helped me manage payroll.

Obtain written authorization from the customer to talk in their behalf into the provider right. To make it easy, we write the correspondence and have them print it on their letterhead. All they have to do is sign it, print it on their letterhead and fax a copy to the provider and me. I keep a copy in case the next time the payroll company and I talk they can’t locate my client’s authorization. You’d be amazed at how many times the provider loses the consent letter!

Quarterly refresh your working understanding of the basic compliance rules.

Produce a connection with a single payroll provider that you like working with and TRUST. My success has come in requesting to have one client service representative that I can go to regardless of which company my client works with to get answers and getting to know 1 salesperson. I never force my customers to proceed to the payroll business once I get their trust I really do suggest that we move to my favored because of my working relationship together, although I prefer and can obtain greater if not aggressive pricing.

If you process payroll on behalf of your client, standardize the format in which your customer supplies you with the payroll information. This will eliminate the guesswork.

Do not forget, even though your customer is outsourcing their pay, the burden of their responsibility for accurate payroll compliance trusts in the business, not the payroll provider that’s why they need you! https://www.peocanada.com/our-solutions/peo-standard