With a seemingly endless number of rules and regulations surrounding payroll, small and medium-sized business owners understand that streamlining this process can be key to the long-term success of their companies. Failing to successfully navigate this complicated regulatory landscape can lead to costly fines and penalties that could spell disaster for any business.
That’s why more and more companies are turning to specialized, third-party processors like PEOs to handle their payroll responsibilities. These entities are experts in the laws governing taxes and payroll and have systems and redundancies in place to minimize or eliminate potential errors. Choosing the right processor is crucial, so it’s important that business owners do their homework.
Facilitating Employee Pay
Whenever an employee or contractor receives payment for services rendered to their employer, it’s the payroll processor that facilitates these transactions. Using data provided by the company, the processor is tasked with determining the appropriate amount to be paid during each pay period. They are also responsible for meeting their clients’ legal obligations by withholding applicable taxes and any voluntary contributions chosen by the employee, such as amounts for medical insurance or a retirement account.
Regulating the Process
While there are a number of IRS, state and local laws in place governing everything from minimum wage and overtime to payroll taxes and frequency of pay, these are only applicable to the employer. If a business owner chooses to outsource their payroll processing to a third party like a PEO and that processor fails to meet all compliance requirements, the business owner is still liable for any resulting fines and penalties.
When Things Go Wrong
With the myriad tax, withholding, garnishment, and compliance calculations required to process payroll, small mistakes are commonplace and can be corrected relatively easily. However, there are times when serious issues arise and, if not dealt with promptly, can compound exponentially and lead to disaster.
Recently, New York-based payroll processor MyPayrollHR abruptly closed, leaving thousands of people nationwide, including both businesses and employees, with negative bank account balances and no answers. Although the exact reasons for the company’s sudden collapse remain unclear, this story highlights the importance of monitoring your payroll vendor and having safeguards in place – just in case.
The ESAC Safety Net
It’s been said, “Hope for the best, but plan for the worst.” When choosing a payroll processor, business owners should seek out vendors that have a history of transparency and accountability. One sure way to know is to look for those PEOs that are ESAC accredited.
As the gold standard in the PEO industry, ESAC accreditation signifies a company’s proven ethical and financial reliability, backed by a $15 million surety bond covering federal, state and local tax liabilities as well as wages, workers’ comp premiums, and contributions to retirement plans. If your current PEO is not ESAC accredited, the relationship you depend on may not be as solid as you thought.
The Sheakley Difference
At Sheakley, our business is built on integrity and reliability. With over 50 years of experience in human resources, risk management, and safety, we understand the enormous responsibility our clients entrust us with. Contact us today and let us help you strengthen the foundation of your business, to protect you from the unexpected and get the peace of mind and financial stability you deserve.
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