Small Business Payroll Processing Options
Let’s face it there are other options besides using Digit Payroll Corp to get your payroll processed. Yes, we would love your business, but most of all, we want you to choose the right one for you.
When it comes to managing payroll, there are really two basic options – in-house or outsource – with joining a PEO (professional employer organization) as a third “possible” option. Let’s review each of these three options in detail using real life examples.
OPTION 1 – in-house payroll:
Processing your own payroll in-house may, at first glance, seem like a cheaper option to outsourcing. Monthly in-house software fees vary from a low of $17 per month to $99 per month plus $2 per employee. So if you have six employees, at most you would pay $1332 per year for the software.
But watch for the software hidden costs – software companies usually make you buy their upgraded accounting software at least every two years to continue using their payroll module. This increases your software fees by $100 to $500 per year.
This is just the software fees. You still need to pay an employee to process the payroll. Further you need to pay your accountant $75 to $200 an hour to prepare the tax payments and payroll tax returns.
- Software fees
- Mandated Accounting software upgrades
- Processing wages
- Accountant fees
Digit Payroll recently welcomed a new client who had been using a popular in-house software. They only had 4 employees and paid them every other week (bi-weekly). Their software contract was up for renewal, and the supplier wanted $300 extra to keep their accounting (payroll software) up to date.
The client’s accountant would log in to their records every two weeks and pay their payroll taxes for them. Every quarter the accountant would file their payroll tax returns for the client. It worked smoothly enough. When the client added up all the payroll processing costs, they found they were paying well over $2,000 per year.
When shopping around, they were pleased to discover that Digit Payroll ‘s annual charges were less than $1,000 per year. Plus they liked the added web-based access for their employees to view their pay stubs and Form W-2’s, and also the direct deposit for all their employees.
They were equally pleased that Digit Payroll would provide them full integration with their software package so there was no manual entry on the client’s behalf – freeing up valuable employee time to do more profitable, revenue-generating activities.
To make a long story short, the set up and conversion was seamless, since Digit Payroll personnel (with over 20 years experience in payroll and accounting) actually logged onto their accounting records and set it up with minimal client intervention. Digit Payroll provided a payroll solution for a flat fee and eliminated the costs of software upgrading, additional accountant and in-house client personnel costs.
BONUS: Our new client got more than they bargained for, as we were able to provide advice on better alternatives in areas of workers compensation insurance and other human resource issues. The client was not billed a dime extra for this advice.
OPTION 2 – payroll service bureaus:
Digit Payroll is not the only payroll service bureau in the market today. In fact, we compete with large Fortune 500 companies that promote a similar service. These big payroll services work well for big companies. But if your business has less than 200 employees, chances are that Digit Payroll can better meet your needs and do it at a lower cost than some of these other companies.
Why? We are a small business, just like our clients. We truly treat each client as our only client, something a large company can’t do. If the big boys were good in this market niche, do you think we would be in business? From a client perspective a payroll service has two main points of contact:
- the technology (reports, web access, accuracy of ease of use)
- the human payroll specialist who speaks to the client on the phone, email etc.
As unbelievable as this may seem, Digit Payroll’s technology is more current than that of its larger competitors and, on average, our personnel has more experience than that of its larger competitors.
Last year something very sad happened – one of our clients switched from Digit Payroll to one of the large Fortune 500 companies. The story has a happy ending, though – within six months they came rushing back to Digit Payroll. Sad, but not unique. This is a familiar pattern. In this case, the client initially switched because they didn’t think we had pay-as-you–go workers compensation insurance. We, do in fact, provide this service, and truthfully we sometimes do a poor job educating clients on all of our ancillary services that we offer.
The client’s nightmare: When they switched to our Fortune 500 competitor, the payroll company assigned three contact people in six months. Each time the client had to re-train the service bureau specialist on how to do his payroll. Each time there were mistakes. Mistake after mistake after mistake after mistake…and finally he had enough and switched back to Digit Payroll.
POSSIBLE OPTION 3 – PEO (Professional Employer Organization):
We call this a “possible” option because, quite frankly, most PEO’s do not market to smaller businesses. We come across this type of competition relatively infrequently. In essence, a PEO hires all of your employees and then leases them back to your business. So the employees are not legally (for payroll tax purposes) your employees anymore, but the PEO’s.
The PEO’s marketing strategy is to try to lower the business owner’s costs by lowering employee related costs such as health insurance. Sometimes they can actually do this but for a fee. The PEO charges their client the cost of the employee payroll, payroll taxes, benefits, etc plus a mark up. So what a business saves in insurance costs will often get eaten up by the PEO’s fees.
We have had only three clients in 18 years leave us for a PEO. Two returned to Digit Payroll and one did not. We are not 100% sure, but we think the third client that did not return may have gone out of business. The main reason for returning was cost. The PEO was much more expensive than they had originally anticipated. And what did they get for the higher cost – much less control of their employees.