While many companies do payroll in-house, hiring a payroll service provider might be a better option, even for small businesses. In fact, about 41 percent of small businesses in the United States use a payroll service. That’s because payroll services for small businesses, particularly those with fewer than 20 employees, can actually save company money.
When trying to determine if hiring a payroll service provider is best for your company, think about the time employees spend managing payroll and examine that cost against the cost of the service. To help simplify payroll, at a minimum, providers usually can:
- Perform all payroll processes so your employees can focus on business
- Ensure state labor law compliance
- Handle payroll tax reporting and prevent costly IRS penalties
- Track employee PTO usage and accrual
- Integrate with accounting software
Coordinate payment, whether printing checks or using direct deposit
To help you make your decision as to whether you should use a payroll service, many providers offer free trials. If you try it out and decide to use a payroll service provider, there are a few things you should do to early on to get the most out of it.
Provide your payroll service provider with your Employer Identification Number (EIN)
When you first start working with a payroll service provider, you will need to share your EIN. This allows the provider to manage tax reporting and supply other information to the IRS and state agencies on your behalf. Sometimes this number is also called the Employer Tax ID or identified as Form SS-4.
Make use of your dashboard
After you sign up with a service provider, you will most likely receive access to a user dashboard. When logging in, you usually can edit your account, add or remove employees, and see reports. This is a great way to keep tabs on your payroll processing and keep employee information up to date. Many providers will also allow for employees to log in to this dashboard, which gives them the ability to track PTO, payment and tax information.
Keep your business address on file with the IRS
While payroll service providers can prepare tax reporting, it is best to keep your office as the address of record with the IRS. Some companies may think they should change the address to the payroll service provider’s, but the IRS advises against that. Keeping your address on file means you stay informed and can protect yourself if any issues present themselves.
If you follow these simple tips when using payroll service providers, you can set yourself up for easy payroll processing and, ultimately, more cost-effective business operations.