Payroll Series Part 4 0f 4

When you are starting or expanding a small business there comes a time when you must hire employees to take on some of the workload. While many entrepreneurs believe they can do it all, the long hours can begin to take its toll on your stress levels. There are a few items that need to be considered with the type of payroll system you are going to use at the top of the list.

Choosing a Small Business Payroll System

A small business payroll system involves making several decisions as to the format of the process. Here are a few questions to answer in order to get you started.

• Will you be paying employees by the hour or with a salary? This will depend a lot on the type of work they are performing. Production workers are generally paid by the hour while support staff tends to draw a salary. No matter what you decide overtime rules apply to both hourly and salary. There are no hard and fast rules here so decide which option works for you.

• If you opt for hourly workers then you’ll need to decide on how they will report their hours.

• How often will you run the pay cycle? Pay cycles in the United States can run weekly, biweekly, twice a month, or monthly in most states. Consider how you expect your cash flow to run when deciding this process. The longer the pay cycle, the more time you have to receive payments from your customers. Note that some states require that withholding taxes are to be paid more frequently than once a month so be sure to check with the tax authorities before choosing a monthly pay cycle.

• What will your overtime pay policy contain? All employers must at least follow Federal guidelines for paying overtime. Some states have more stringent rules so check the state rules for paying overtime in your jurisdiction.

• Will you be providing paid time off? This includes sick time, personal days, statutory holidays, bereavement, and vacation time.

• What benefits are you going to offer? Are they going to be fully funded by the company or are deductions from employees required? Benefits such as health, dental, and 401(k) require written authorization from the employee in order to be legally deducted. This is also true of wage garnishments, property, and employer loans.

Processing Payroll

Once those questions are answered, the next step for a small business owner is to decide how the payroll will be processed. There are a few options to consider and with the complexity of the payroll process in our times its ideal that there are so many choices to consider.

• Professional Employer Organization (PEO) – is an outsourcing firm that handles hiring, payroll, benefits administration, and withholding tax submission. These firms handle the details while the small business owner grows the business.

• CPA or Bookkeeper – will in some cases process the payroll for small businesses.

• Payroll Software – there are many excellent software programs that can be implemented to process payroll. The downside is that you require an employee to run the software including data entry, printing checks, direct deposits, and calculating and remitting withholding taxes.

• Online Payroll Processing – is a fairly new way to process payroll. Again, you require an employee to enter the data into the system but the actual processing is done by the supplier of your choosing.

Once you have answered these questions and decide on a course of action then you can get to work on finding key employees.  The payroll process is not something to take lightly as there can be serious repercussions from federal and state tax authorities if things go awry. If the thought of all this makes your head spin a little then a PEO may be your best option.

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Payroll Series Part 1 of 4

It’s not easy launching a new business or expanding an existing one. But with careful planning and execution, the business plan will fall into place. A key component of any small business with employees is the payroll function. Although payroll is not complicated in itself, it requires a significant amount of attention to detail. Your employees need to be paid correctly and the various levels of government, of course, want their share. And they want the correct amounts each and every time. So, we’re about to embark on a 4-part series of blog posts to take the small business owner through the payroll process.

Getting Started with Small Business Payroll

Before you begin hiring employees, you must determine the type of entity that you want your company to operate under. There are payroll tax issues that must be considered for LLCs operating as sole proprietorships or partnerships. The right organizational structure for your company can help keep your payroll tax obligations to a minimum. A PEO can advise you on the best strategy for your circumstances.

The first step that needs to be taken when hiring new employees is to obtain an Employer Identification Number (EIN) from the IRS. You may have already registered for this number during your business start up, however, if you don’t have one you can obtain this by filing an SS-4 or by applying online on the IRS website.

Once you have taken care of obtaining your EIN then you can begin to hire new employees. As with all things in regards to government there are a few forms that need to be filled out by each new employee. Although the IRS legally requires you to have new hires fill out these forms, they also serve to protect your business from potential tax liabilities in the event of falsified information. So, without further ado, here they are:

• W-4 Form – All U.S. employees are required to fill out this form in order to inform you, the employer, how much federal income tax to withhold. Just a quick note here for you to refrain from giving advice to an employee on filling out the W-4 form to protect your business from any future tax liability in the event of an error.

• I-9 Form – This form verifies that the employee is authorized to work in the United States. In addition to completing the I-9 form, each new hire must provide documentation in regards to their identity and U.S. employment eligibility. A passport, green card, driver’s license, and Social Security cards are some of the eligible documents required.

• State and Local Taxes – You will also have to check with state and local governments in order to withhold and remit taxes based on the legalities of your locality.

Human Resource Policies

To prepare for new employees joining your organization you’ll need to have some procedures in place in order to integrate them into the company culture. Here are a few Human Resource issues to consider in order to get you started:

• Job Applications
• Employee Handbook
• Background Screening
• Drug Testing
• Employee Assessments

These initial steps will set you up to hire new employees for your small business. If it appears a little daunting then a consultation with a Professional Employer Organization (PEO) can ease the pain and help prevent any slip-ups along the way. In the ensuing posts we’re going to cover the withholding taxes in more detail due to the fact that interest and penalties due to error can financially bury a new enterprise. We’ll then move into making the critical payroll setup decisions, tools to process payroll, and various report filing legalities. So, stay tuned.

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The Benefits of Hiring a Professional Employer Organization (PEO)

A PEO is an outsourcing service that takes on a company’s administrative tasks in regards to the human resource and payroll functions. Key tasks such as payroll, health insurance, and employee benefits are some of the functions of a professional employer organization. It is a cost-effective solution for management personnel in both time and money – an ideal service that adds to the bottom line.

9 Steps to Picking the Right PEO

1. Determine the services that you require for your business. Some companies are only interested in outsourcing payroll functions while others desire the whole package of human resource administration.

2. Be sure to meet personally with the operators of potential PEO organizations. You want them to be as interested in your success as you are.

3. Ask for and follow up on references. Ask pointed questions of other clients of the PEO as to how the service has benefited their business.

4. Look for professional employer organizations that belong to the National Association of Professional Employer Organizations. NAPEO is the largest national trade association for PEOs.

5. Find out who will be administering your services at each PEO. Are they qualified to handle your needs? Do they have the requisite education and training? You’re looking to make your business life easier not create another problem.

6. Understand how the employee benefits are tailored and how the employee benefits are funded. Determine if they fit the needs of you
and your employees. Is the PEO fully insured, self-funded or partially self-funded?

7. Get a detailed proposal on the full breadth of services offered before signing the contract.

8. Review the service contract carefully. Use the services of your lawyer if you feel more comfortable. Be sure that each party’s responsibilities and liabilities are clearly defined. Look for a guarantee on the PEO’s service as well as the termination/cancellation clauses.

9. Be sure that the PEO meets all requirements for the state it is operating in.

Choosing the right PEO for your business is no different than hiring personnel for your company. You want to make sure you get the right fit for your business and that it truly opens up more time for you to concentrate on opportunities. So, ask the important questions and consider the answers carefully. You’ll be glad you did.

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What can you do to tip the odds in your favor? The answer appears simple–satisfy more customers. But, if you want testimonials, referrals and repeat customers, don’t just satisfy them—you have to deliver knock-your-socks-off service!

In order to give your customers what they want, you must know what they want – assuming won’t guarantee out-of-this-world customer happiness.

Measure customer satisfaction
Here’s where a targeted client satisfaction survey comes in—it takes the pulse of where your clients are on the happiness scale.

Human Capital Strategies has been conducting a customer survey for the past two years. It is now part of their strategy to maintain clients and increase referrals. Jason Knight, Founder states, “We focus on fulfilling our company’s mission statement, which makes a promise to our customer about the quality of service we provide to them. It made sense to ask them how we were doing.”

Target areas to improve
Knight targets communication, problem solving, fulfilling client expectations and whether services were completed in a timely manner. The 2009 Survey shows a high percentage of customers were satisfied with:

• Communication with clients 95.83%
• Timeliness of service and problem solving 100.00%
• Meeting client expectations in value of service 94.66%
• Ease of doing business with 97.92%

Take action
Although the numbers look good the past two years, Knight challenged his staff to improve the quality of their services to their clients. It must be working, because Christine Nichols was a finalist in the 2009 Phoenix Human Resources Manager of the Year (http://www.prlog.org/10433384-human-capital-strategies-celebrates-christine-nichols-selection-as-hr-director-of-the-year-finalist.html), and Human Capital Strategies was named a finalist for the 2009 Sterling Awards (http://www.prlog.org/10404152-human-capital-strategies-named-sterling-award-finalist.html).

It’s clear that one of the best ways to ensure success for your company is to ask customers how they feel about your service. If you fall short of their expectations, then up your game. Take action and then next year, take another survey

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A professional employer organization (PEO) and administrative service organization (ASO) are organizations that provide services for your human resources, payroll and employee needs. Providers vary in size and stature, but should all specifically focus on your company’s and employees’ needs. They are a team of qualified human resource personnel, who take on many tasks specifically designed to increase in-house efficiency. A PEO/ASO even can take care of workers’ compensation and other important time consuming tasks. By outsourcing these responsibilities to an external organization, your company could save a large sum of money.

1. Simplify The Hiring Process

A PEO/ASO will save your company money by speeding up your application process. Most small companies do not have a dedicated human resource staff to evaluate new employees. This causes current staff members to evaluate new employees, a situation that is less than ideal. The current staff member will be less adept at judging new applicants than qualified human resource personnel. Also using current staff members to evaluate new employees will divert them from their daily tasks. A PEO/ASO doesn’t actually tell you which employees to hire, but will save time by refusing any applicants that don’t meet your minimum requirements. A PEO/ASO will take on the front end of your hiring process and help bring qualified personnel to your door.

2. The Best Deals In Workers’ Compensation

Another great way a PEO/ASO will save money is through workers’ compensation insurance. If you are running a relatively low risk business, you may not need to worry much in this area. However, if you are running a high risk business, like construction, then a PEO/ASO may be a huge benefit to your organization. PEO/ASO’s can save costs on workers’ compensation insurance. They can provide this because of two reasons; they are providing insurance at high volumes and may get better rates, and they often have a working relationship with carriers, medical providers, and claims departments.

3. Employee Benefit Administration

PEO/ASO’s are organizations that will manage the complex world of employee benefit administration from the simple functions of collecting the necessary premiums to remit monthly payments to the carrier, to monthly invoice auditing and billing reconciliations. Most importantly, COBRA administration has gotten substantially more complex with the passing of the Stimulus Package making complying with regulations even more difficult. Having an outside organization for these issues will save a considerable amount of time (and likely money).

4. Say Goodbye To Payroll Processing

Another way a PEO/ASO can save your staff time is by taking care of payroll and administration services. PEO/ASO’s can prepare and deliver payroll to your employees, as well as, take into account the necessary taxes. These taxes include Social Security, Medicare, FIT, SIT, FUTA, SUI and others. Your PEO/ASO can manage vacation and sick time accruals as well. Moreover, your PEO/ASO prepares and files all of your quarterly and annual reports, FICA, FUTA, and SUTA, W-2s, etc., freeing up more time for your employees to focus on their core responsibilities.

5. Outsource HR – The Easy Way to Resolve Disputes

By outsourcing employee issues such as compensation, payroll, unemployment claims and other problems you will save yourself a ton of headaches. Furthermore, by adding a third party that can help in any disputes between an employer and the employee, you will be providing an easy way to resolve any issues out of house. Not having to deal with these kinds of issues in-house is enough of an incentive for many companies to use a PEO/ASO.

These are five great reasons a PEO/ASO could save your company a substantial amount of money. By outsourcing many tasks to another organization, you will be decreasing your liability, as well as, the amount of on-site employees you have in your business, reducing labor costs. Not every PEO/ASO is the same for the best fit for your company. Click on the link below to learn important details you will want to know before hiring a PEO/ASO.

Go here for more on PEO and ASO services.

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If you do business in Utah, you need a heads-up on this small article recently published in this daily Salt Lake City newspaper. It isn’t unheard of for this type of situation to arise. Be sure to know who you are working with or even see if they are willing to prove that they are making current tax deposits from time to time. Click here to read more about this article.

To find a Professional Employer Organization (PEO) provider in good standing with both the IRS and NAPEO, check out PEO Services.

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