A small business payroll solution can save you time, money, and potential legal costs. Making sure employees are paid on time with adequate tax withholding is a big responsibility. There are a ton of payroll providers in the market, ranging from completely outsourced solutions like Paychex and ADP to completely do-it-yourself solutions like Intuit QuickBooks Payroll and PayCycle.
Before considering a payroll solution, you should ask yourself these key questions:
- How often do you need to pay your employees? If you’re a typical employer, you’ll definitely need some kind of payroll service to manage your payroll. It can be extremely time consuming to run payroll by hand if you’re paying your employees weekly or bi-weekly. If you have contractors and hire 1099s, you should be fine without any payroll software.
- How many employees do you have? If you have less than 5 employees you can probably do fine with a do-it-yourself payroll provider or use online payroll software. If you have more than 5 employees you may be better off using an outsourced payroll provider like ADP or Paychex. These outsourcers guarantee that tax payments are fulfilled in a timely manner, something that payroll software providers don’t necessarily guarantee.
- Do you want to offer direct deposit? Most employees expect direct deposit. Getting a paper check seems so old fashioned! The issue here is not whether or not your payroll provider (whether payroll outsourcer or payroll software provider) has direct deposit, because nearly all the payroll companies you will find offer direct deposit. Make sure your payroll provider doesn’t charge for direct deposit. After all, you’re already paying for the payroll software or outsourced payroll service–why should you pay extra for direct deposit?
- Do you need your payroll service to file taxes on your behalf? This is the big question when it comes to picking a payroll provider because most payroll software companies don’t actually file your federal and state payroll taxes (940 forms) on your behalf. Usually only an outsourcer like ADP or Paychex will actually file taxes on your behalf, and also guarantee that those payroll tax payments are received in full and are accurate.
- Do you have employees in more than one state? Having employees in more than one state is a big burden when filing payroll taxes for your business. Generally speaking, if you have employees in more than one state, do-it-yourself payroll software like Intuit Online Payroll and SurePayroll may not be robust enough to handle the complexities of inter-state payroll calculations for your business. You’re probably better off with a payroll outsourcer or hiring an experienced payroll accountant to handle your business.
If you have several employees that you need to pay on a bi-weekly basis, payroll can become an onerous task. Additionally, providing direct deposit is nearly impossibly without a payroll solution that offers ACH transfers. Inter-state businesses also create a more complex tax situation for small businesses.
If your business uses QuickBooks, the choice is very simple–QuickBooks Enhanced Payroll is likely the right product for you. Another great option is Intuit Online Payroll, which has a 100% free trial available.
ADP and Paychex offer expensive outsourced solutions that can cost you business up to $1,000 a month. If you have an in-house accountant, outsourced payroll isn’t a good option because you can get this expertise from within your business. If you don’t have a strong accounting staff, ADP or Paychex may be a decent solution, but comes with a hefty monthly price.
