Small businesses have a lot to consider when coordinating day-to-day business operations, managing growth and hiring employees. Properly handling payroll —from tracking leave, deducting correct premiums, and facilitating benefits for eligible employees — can be a daunting task on its own.
The reality is that getting payroll wrong — even something so simple as paying an employee late — can result in significant costs and penalties.
Weighing the benefits of automated payroll extends beyond a need to simplify this administrative burden, centering on a company’s need to establish a hedge of protection around employee data and the bottom line. Here we’ll examine some of the leading reasons small businesses should consider payroll automation.
1. Reduce Hours and Dollars Invested in Payroll Administration
From tracking records and sending on-time payments to making deduction calculations and organizing tax forms, payroll administration can require an extensive investment of time. The America Payroll Association has estimated that payroll automation can reduce a business’ processing costs by as much as 80 percent.Businesses can take advantage of online services that enable employee self-on-boarding, streamlining the input and secure storage of personal information or even bank information for direct deposit. Other programs can automatically report new hires to the government and email pay stubs directly to employees on a weekly or bi-weekly basis.
Online and even cloud-based payroll solutions can be tailored to the needs of your growing business, helping to reduce time invested in payroll management and ensuring the accuracy of every paycheck or tax filing.Automated systems ultimately increase the efficiency of information collection, data aggregation and processing, payments and record retention and more. Many outside third party administrators process payroll for minimal cost, completely relieving you of this cumbersome burden.
2. Minimize the Risk of Costly Errors
Even the most methodical do-it-yourself payroll systems can incorrectly compute funds due to an employee, or fail to file taxes with local, state or federal governments on time.Failure to punctually deposit payroll taxes can result in IRS fines of up to 10 percent of your total tax liability. Even worse, failing to pay the federal government can lead to criminal charges.A “willful failure to pay over or collect tax is a felony punishable by up to a $10,000 fine or five years in prison, or both” (note that the IRS typically only applies criminal charges to the most flagrant cases).
Tax regulations and deadlines also exist at the state and local levels and carry fines for noncompliance.Automated solutions and third party administrators that automatically manage, compile, translate, and file payroll information and taxes for you significantly reduce the chance for costly errors.
3. Ensure Proper Record Retention
As required by the Fair Labor Standards Act (FLSA), employers must keep payroll records, collective bargaining agreements, sales and purchase records for at least three years. Files on which wage computations are based are to be kept for two years, e.g., time cards and piece work tickets, wage rate tables, work and time schedules and records of additions to or deductions from wages. These records are to be kept at the place of employment or a central records office and available for inspection at any time.
According to the Age Discrimination in Employment Act (ADEA), employers must also keep any employee benefit plan, including pension or insurance plans, and any written seniority or merit system for the full period the plan or system is in effect and for at least one year after its termination.Tax laws require employers to keep tax files for a minimum of four years.As your business grows and your employment base multiplies, it becomes essential to automate and streamline payroll record compilation and retention. Automated payroll solutions digitize files and securely store them online, increasing accessibility and visibility and reducing the risk of data exposure. Online solutions also facilitate automated report production and protect files against a natural disaster.
No matter your business size or budget, considering automated payroll is a worthwhile effort that can present significant cost savings and increase the overall efficiency of human capital management. When choosing a payroll system or service provider, be sure to examine multiple factors, including:
- Security— HR and payroll data contains sensitive information that needs to be handled securely.
– Secure website (SSL) technology and encryption options
– SSAE 16 Type II
– Multi-tenancy data segregation
– Two-factor authentication
- Integration— One system or platform minimizes duplicate entry and potential data syncing issues.
– Payroll, HR, TKM and other options to have common navigation
– Consistent screen layout
– Accurate data input and aggregation, e.g., new hires are only entered once
- Payroll Taxes— Taxes are a reality of conducting business. The provider you select should be able to process and file federal, state and local taxes on time and according to all applicable regulations.
– Reports to easily view deductions and taxes
– Systems that can handle complicated local tax regulations, such as those stipulated to Ohio and Pennsylvania businesses
– A commitment to accuracy and timeliness.
Contact Sheakley today to learn more about how we can support you and your business’ human capital management efforts. Check out our full-featured, online payroll administration system or pick and choose from our a la carte solutions. Our team of experts will set you up with only what you need so you can stop paying for services you don’t.