While it can be rewarding to be an entrepreneur and successfully operate a small business, there are roadblocks along the way to achieving said success, especially as an employer. Some of the major challenges that business owners with employees face include keeping up with constantly changing employment regulations and tax laws and the hassle of managing payroll.
For businesses with a small number of employees, running payroll in-house may appear to be the best approach. Most employers choose to handle payroll functions themselves to save costs on outsourcing payroll functions. However, this takes up a lot of time and can be quite difficult to get right. Aside from the risk of miscalculation, it's easy for employers to run afoul of deadlines and regulations or lose track of updates/changes to laws. Such blunders can result in hefty fines, penalties and an unhappy workforce.
An overview of SMB payroll management functions
Payroll management involves a lot more than computing total wages owed and handing out checks at the end of every pay period. An enormous amount of data must be collated, analyzed and properly handled to ascertain how employees are to be paid, the amount of taxes to withhold and pay, how benefits time is managed, and to enable proper reporting and compliance/adherence to government regulations.
While there are a lot of nuances to payroll compliance and reporting, technological solutions can make things much easier. Traditionally, SMB owners had two approaches to payroll management: hiring a full-service payroll provider or taking a do-it-yourself approach. However, both options come with several challenges.
Challenges of DIY payroll management
Employers who take a DIY approach to payroll management end up wasting time that would be better spent on managing and growing their business. They also have to learn how everything works: filling out relevant forms for each employee, registering with various agencies, and meeting the compliance regulations of multiple states and jurisdictions.
Arriving at the amounts of withholding for each employee is a complex affair. Employers must continuously review employees' W-4s(which can change at any point) to determine FICA taxes on wages, state withholding amount and federal income tax withholding while making sure that Social Security withholding is capped at the maximum for highly paid employees.
They must also keep track of reporting deadlines and accurately report pay payroll taxes (individual state payroll options, unemployment and workers compensation, FICA taxes, withholding, federal and state).
While full-service payroll providers provide exceptional services and remove the burden of managing payroll from the shoulders of employers, the cost of their services can be prohibitive for SMBs. Fortunately, there is a third option: payroll software solutions.
The benefits of using a robust payroll software solution
With major advancements in the technology and the greater adoption of the cloud, business software is becoming increasingly available to SMBs. SMBs and entrepreneurs can enjoy enterprise-level software without coughing up the significant financial investments required to deploy and maintain costly hardware-based legacy solutions on-site.
Payroll is an incredibly complex and ever-evolving field, and the best way to handle it is by using a payroll solution. More and more SMBs are investing in payroll solutions to help increase accuracy and efficiency in paying employees, filing and calculating taxes and complying with various governmental regulations.
This leaves business owners free to concentrate on more strategic tasks that will grow their business, expand the customer base, and drive increased ROI and better business outcomes.
These solutions offer employers a cost-effective way to manage their payrolls by providing intuitive, easy-to-use portals that allow the entry and computing of hourly wage data for individual employees. Business owners can review and approve payrolls anywhere, anytime and from their device of choice. The best payroll solutions automatically update tax rates and reflect changes as new regulations regarding deductions are introduced. Lastly, such solutions should be able to scale easily as the business grows.
Payroll solutions help SMBs remain agile and innovative
For businesses with a small number of employees, it may seem like the smartest and most cost-effective option to run payroll in-house. However, when the legal considerations, tax regulations, the risk of errors in reporting or filing taxes and the actual time it takes to manage payroll are weighed, taking a DIY approach to payroll may not be the best option.
With robust cloud-based payroll solutions, SMB owners can automate and systemize payroll tasks to boost efficiency, accuracy and drive competitive advantage while freeing up their most valuable and non-renewable resource: time. To survive in the current business landscape, small business owners must be agile, innovative and leverage robust payroll solutions.