Can I Do Payroll Myself? Well, Do You Know the Current Laws?
Running payroll for your own business is something that can only be done successfully with a sufficient understanding of current payroll and taxation laws.
Among many things, payroll involves recording details such as wages, deductions, tax withholding, and the accrual of entitlements. To record and calculate data manually requires a good sense of attention to detail and the ability to differentiate between payroll components. In addition to proper record-keeping, keeping all employee information secure and accurate is an additional responsibility.
Should I Do Payroll Myself? Minimum Requirements:
- Accurate employee information – tax registration and payroll details
- Time tracking data – usually collected via timesheets, payroll tracking software, and punch cards
- Calculation – Calculate the salary amounts and the deductions for each employee at the end of each payroll period
- Disbursements – pay each employee by electronic or physical check, direct transfer, or any other acceptable methods
- Employee communication – deliver pay stubs with pay period details to the employee for their records
- Tax preparation – Pay employment taxes due each pay period
There Are Advantages to Doing Your Own Payroll:
There are a few advantages to processing your company’s payroll. This includes developing an understanding of how wages and taxes operate in the business allowing greater visibility and management of salary expenses.
There Are Also Advantages to Outsourcing Your Payroll:
However, there are many disadvantages to manually processing payroll for one’s business. Significant disadvantages to this model include the lack of access to experts as a reference as well as the effort required to review information and accuracy before the payroll is finalized.
Additionally, when payroll processing isn’t a core competency of the business, there is a high risk of processing as well as other types of errors. Errors associated with processing payroll items incorrectly could expose the business to legal and financial risks, which can be substantial.
It also creates challenges for those who aren’t well acquainted with payroll compliance and regulations. The training to achieve an acceptable level of competence will cost time, commitment, and energy which may very well negate any cost savings.
In the end, Can You Do Payroll Yourself? Size Matters.
Lastly, unless your organization is quite large, it is almost always cheaper to outsource payroll. Payroll outsourcers have the automation, focused expertise, and economies of scale that enable them to process payroll efficiently and accurately. So in the case of payroll, it generally makes more sense to allocate your energy and time to the more lucrative aspects of a business rather than on processing payroll.
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