What do payroll companies typically offer?
Payroll services do quite a bit more than just issuing checks, so consider some of these services for your business.
All payroll companies offer similar core services: calculating payroll and tax obligations for each employee, printing and delivering checks, and providing management reports. Payroll services can handle business for pay periods that run weekly, biweekly (every other week), semimonthly (twice a month) or monthly.
Beyond these basic transactions, payroll services can provide other related services at an additional cost. These costs can add up quickly, so be clear on which features are offered, if they are available in packages, and if they match your company's needs.
The three general categories of added-cost payroll options are payroll distribution, data collection, and benefit management features.
Payroll distribution
Payroll services offer a number of options surrounding actual distribution of your payroll come payday. You'll want to pick and choose which of these is right for your employees.
Automatic check signature
Is the person whose John Hancock is on each check hard to pin down? If so, you might find value in automatic check signatures. A computer-generated signature is printed on each check, eliminating the need to sign them manually. Even if you take advantage of this option, you can still choose stuff the envelopes and distribute the checks yourself.
Direct deposit
Services can also transfer payroll funds directly into employee bank accounts, issuing a voided payroll statement instead of an actual check to each employee. Highly regarded for its convenience and security, direct deposit is one of the most popular options of payroll services.
On the administrative side, direct deposit speeds up check reconciliation, so that businesses know exactly when funds will be withdrawn from the payroll account. Also, since funds are transferred electronically, employees often have the option of depositing money into several different accounts. It also reduces the number of trips to the bank!
Debit cards
Debit or "access" cards are not yet common with all payroll service providers. It allows employees that do not have checking or savings accounts to receive an "access" card in the dollar amount of their paycheck. Employers don't have to print paychecks for employees that can't take advantage of direct deposit.
It works like a debit card issued by a bank, allowing the employee to make purchases and withdrawals. However, the employee is charged for each transaction, with the amount dependent on the service provider you choose. When using this option it is important to receive payroll registers at least a day before payday, to catch mistakes before they are transferred to your employees' accounts.
Paycheck delivery
You have a choice of delivery options for the checks, including first class mail, overnight delivery, or courier service.
Data Processing/Reports Management
By definition, data processing is how your company's payroll information is processed. Companies with hourly workers, for example, may have employees swipe time cards through machines so that hours are automatically calculated and easily transferred to the payroll service. Another option is to use an electronic time sheet, which can be saved to disk and given to the payroll service provider for processing.
To help keep track of this data, payroll services can issue reports summarizing each payroll period. Most reports include information such as payroll totals and tax totals for each employee, in addition to total payroll and tax obligations. More detailed information, including breakdowns by department or by location, can also be included. Reports can be customized for an additional charge -- or you can choose from existing formats.
Or if you prefer, you can explore the option of receiving your data on diskette. There is software available to analyze payroll and help you automatically generate your own reports.
And there's always the Internet. Since 1998, several national payroll providers have offered payroll data transmission over the Internet; their customers can download payroll information from any computer that is Internet-accessible.
In addition to the payroll-specific services currently offered, many service providers offer an ever-expanding menu of services to enhance and facilitate employee benefits. From 401(k) retirement planning to career counseling and resume screening, payroll providers are becoming one-stop Human Resource departments.
401(k) plans
Without attractive benefits like a 401(k) plan to offer, smaller businesses have difficulty competing against their larger counterparts for the best employees. Payroll services help even the score by offering fairly reasonably-priced plans designed by mutual fund companies.
Section 125 Cafeteria Plans
Section 125 cafeteria plans allow automatic pre-tax deductions of certain benefit premiums. As a result, employees have a higher take-home pay and employers have lower Social Security (FICA) payroll taxes. In some cases, employers can decide how much money should be set aside and where it should be allocated.
Employee manuals
As your company grows larger, you will probably need to have more formalized "rules of the road." Payroll services offer employee manuals that address the vast range of rules concerning employee conduct and related regulatory information. This can be a particularly effective way of not having to re-invent the wheel or invest the time necessary to keep up with the latest government regulations.
Integrated HR systems
Integrated HR software systems aggregate the benefits-related information that needs to be recorded for each employee. These systems keep track of pertinent data such as vacation days, sick days, pay rates, and benefits levels for each employee in addition to regular payroll data.
By housing the data in one place, you can eliminate redundant data entry and facilitate employee benefit tracking as it relates to payroll issues. These systems are usually most appropriate for mid- and large-sized businesses.
Employee assistance programs
Employee Assistance Programs (EAP) deal with broad issues such as sexual harassment education, diversity, and violence prevention. On an individual level, EAP provides referrals for employees in need of drug, alcohol or family counseling.
In addition, many payroll providers offer to complement these programs by taking responsibility for other HR tasks like maintaining management manuals, screening resumes, and designing personnel forms.
Benefits Management
Have you ever walked into a bookstore searching for a specific title and found yourself sampling music and sipping cappuccino instead? Just as bookstores are no longer solely for books, payroll choices can be both appealing and distracting. Small and large firms alike will appreciate services like 401(k) and Section 125 cafeteria plans, while other features are more suited to larger businesses.
