There are several payroll fees to consider when you are choosing an outsourcing service for your business. Many smaller companies consider in-house payroll processing to be less expensive than choosing an outsourcing company. However, many finance managers discover that in-house payroll is not as cost effective as it appears. To take a case in point, the IRS has reported that one out of every three employers has been charged for a payroll mistake. Additionally, the time spent managing your payroll process could be better spent growing your business. With that being said, choosing the right outsourcing service is crucial to obtaining a less expensive, simpler way to pay your employees. In this post, you’ll learn about several payroll fees to consider when choosing an outsourcing service.
Basic Package Fee
The majority of outsourcing payroll services charge a basic package fee. On average, this ranges anywhere from $20 to $250 per month. Generally, this fee includes direct deposit, processing paychecks, tax filing, and an online portal where you can access your employees’ checks. Basic fees usually account for your business’s residential state, your pay period frequency, the number of employees, and your jurisdiction’s payroll tax. Often, large companies will receive discounted package fees, which decreases their per capita payroll cost. The basic package fee can be an indicator of whether or not outsourcing is cost effective for your small business.
Payroll processing sources may also charge an implementation payment. This is essentially a setup fee that covers adding new employee hires to the financial management system. Here, there may be charges based on how your pay your employees. For example, some service providers charge an extra fee for direct deposit. On the other hand, some providers charge a fee for printed checks. Conducting research on the specific fees that are unique to each outsourcing service can help you find the right payroll processor for your business. Implementation payments are another payroll charge to keep in mind when searching for the right outsourcing service to meet the needs of your business.
Tax Assistance Charges
Another cost to consider when choosing an outsourcing company is tax assistance charges. Assistance charges cover any non tax deductible expenses. This may not be covered under your basic package fee. For example, you could pay extra for year-end tax processing. This may include W-2 printing, mailing, and reporting. Your year-end reporting could cost as much as $50 per employee. However, this depends on the complexity of your payroll, such as whether you contribute to your employees’ pretax plans. In addition, you may be charged extra tax fees if you have employees in multiple states. Tax assistance charges are another fee to consider as you look for an outsourcing payroll company to manage money in your small business.
There are some payroll services that may require separate additional fees. For example, automatic check signatures as well as W-2 and 1099 processing sometimes call for an extra charge that is not included in the basic package fee. To manage your expenses, it is best to define your business’s needs before signing on with an outsourcing service. Some providers may even have an all-inclusive package that can meet the needs of your company. Importantly, some payroll providers offer lower introductory prices. They then subsequently increase their rates after the first six months. It is vital to be aware of additional fees and how they affect your specific industry when you are choosing an outsourcing company.
More specifically, monthly costs for Paycheck Protection Program (PPP) loans are another fee to consider when choosing a payroll provider. This U.S. Small Business Administration (SBA) loan is designed as an incentive to keep workers on the payroll during the coronavirus crisis. Under the PPP, the SBA will provide relief funds to cover payroll costs and other expenses. All covered salaries and wages are capped at $100,000 per employee. Loans will be deferred for six months and will be fully forgiven if the funds are used for payroll costs, mortgage interest, rent, and utilities. However, forgiveness will be decreased if the employer does not maintain full-time employees or if salaries and wages decline. A PPP loan can be beneficial to your small business during COVID-19 as long as you are aware of the costs.
There are many payroll fees to consider when choosing a payroll provider service for your business. With outsourced services, you can easily monitor payroll job responsibilities across your organization. First, the basic package fee can give you a general idea of whether or not outsourcing is the most cost-effective payroll method. It is also essential to keep implementation payment in mind. Moreover, tax assistance charges may not be covered within your basic package fee. Additional fees such as automatic check signatures also factor into the true cost of your payroll provider fees. During COVID-19, PPP loans are a viable solution to keep employees on the payroll in your small business. However, you should be aware of the loan forgiveness terms to avoid increased expenses. Consider these payroll fees when choosing an outsourcing service to manage your small business finances.