taxreqThis series will discuss some of the major payroll responsibilities that employers need to be compliant with. Part 1 of the Employer Responsibilities for Payroll talked about the different accounts and programs that a business typically needs to open with the federal and provincial governments as part of setting up payroll.
In Part 2 of this series, we look at the next steps in completing the payroll setup process through choosing a payroll system.
Selecting a payroll system
There are various aspects to consider when determining whether to do your payroll in-house or outsource it to a payroll company. A lot will depend on the number of employees and the complexity of payroll withholdings for the business. There are a lot of payroll systems available for Canadian businesses of all sizes. You can choose do payroll in-house, or can outsource payroll to a payroll processing company.
Keeping Payroll In-House
Manual Payroll Calculations
If you have few employees, it can be fairly easy to process your own payroll. While you can calculate payroll deductions manually, I do not recommend it. Manual payroll calculations are prone to errors, and this can be very costly to the business. If you have to do manual payroll calculations, the Canada Revenue Agency has an online payroll deductions calculator that you can use to calculate the amounts of statutory deductions that are required from your employees’ pay. I usually use it as an extra check to make sure that my payroll program is calculating the correct amounts.
Payroll Subscriptions
If you are doing payroll in-house and do not have a payroll program, I recommend that you subscribe to one of the payroll software subscription services available in the market. I personally use QuickBooks payroll for my business and for my clients. There are other similarly great alternatives, such as Sage 50 Payroll, Canpay (free if your payroll contains 20 employees or less), Wave, Payment Evolution, etc.
One advantage of using an online payroll software subscription is that the payroll tables are kept up to date, and you do not have to worry about using the wrong rates to calculate payroll. The costs of using payroll software subscriptions range from free, but typically are in the $40 to $60 range a month for around 5 employees. This is fairly low cost, and can help you save money. The payroll software subscriptions are often very user friendly and have easy to use interfaces.
Pay attention to filing and payment deadlines – If you decide to do payroll in-house, you have to make sure that you are aware of the filing and payment deadlines. A common issue with doing your own payroll is the dependence on a single individual to manage the payroll process. If that person is absent or leaves the company, important tasks and deadlines can easily be missed or overlooked.
Outsourcing to a payroll services company
There are many regulations to keep up with when it comes to payroll and benefits. As a business owner, you may find that you simply do not have the time, expertise and resources to manage your payroll in-house, let alone keep up with the payroll regulations. Outsourcing the payroll function is a great option because your payroll tasks are handled by experts who can provide a reliable and cost efficient service and allows you to focus on your core business activities.
There is a misconception that small businesses are too small to outsource payroll, and only larger companies can afford to do that. That is not true. In fact, businesses of all sizes can benefit from outsourcing their payroll function. Payroll tasks can be very complex, time consuming, and requires considerable knowledge and expertise. Mistakes can be very costly to the organization. If you do not have the time, resources and expertise to manage the payroll in-house, outsourcing payroll makes a better option.
Benefits of outsourcing payroll
Cost Reduction – The cost to outsource to a payroll service provider is way less than the cost of an employee doing the work in-house. You also save on overhead costs as you do not have to buy expensive payroll software and spend money on keeping the software up to date.
Free-up time – Payroll takes time! Regardless of the number of people employed by your business, salaries and wages have to be paid. With that, you are dealing with data that varies from employee to employee and needs to be processed and checked for accuracy. Outsourcing payroll will free up your time so that you can focus on your core business activities.
Access to Expertise – Most business owners would not have time to constantly study and keep up with the often changing and complex legislation affecting payroll. By outsourcing payroll to experts, this is one less thing to worry about. You get the peace of mind that your payroll is being done accurately and meets all the compliance requirements.
Less Worry – Businesses that depend on a single staff member to handle the payroll processes are putting themselves at risk if that person leaves or is absent. Payroll outsourcing companies greatly minimize this risk as they will have resources to ensure that there is a continuity in processes, payroll calculations are accurate, and that payroll filing and payments are done on time. If a payroll outsourcing company makes a mistake, you can hold them responsible for the costs to remedy the mistakes.
Data Security – Payroll outsourcing companies will have high levels of data security and robust disaster recovery and business continuity processes. When you outsource payroll, you reduce the risk of employees gaining access to payroll information from company files.
Tips for Choosing an Outsourced Payroll services Provider
When you are considering which company to outsource your payroll functions to, you need to consider the following:
Your payroll needs – what do you need the payroll company to do. Is your payroll basic, or do you have complex needs such as commission, out of province employees, special employee perquisites and benefits. Your choice of a provider will need to consider if they can handle your payroll needs.
Security and Reliability of the Provider – Payroll data is highly sensitive, so you want to make sure that your payroll services provider has data security protocols and good controls to safeguard your employees’ information.
Track Record of the Provider – Check if the payroll provider has a strong track record of serving businesses like yours and if they are experienced in your industry. Can they scale their service to meet your growing business’ needs?
Regulatory Compliance Capabilities – Does the payroll provider have the resources to keep up with the laws and regulations around payroll? Are they able to handle all of your payroll tax compliance needs accurately and on time?
Customer Service – when considering a payroll provider, you want to make sure that they can provide you the support you need on a timely basis. You do not want to deal with automated messages. Ask if they will have a dedicated account manager or support staff. What is the average response time?
Reporting – Can they provide you reports and access to payroll information for accounting purposes and tax filings? Are your employees able to access their own payroll information, such as payslips and year-end slips?
Conclusion
As you can see, managing the payroll process can be a complex and time-consuming activity and needs to be considered carefully. You need to look at what your business needs and what is the most efficient way to be compliant. If you can manage it in-house, you can enjoy some control on the process; however, it requires a lot of time commitment and considerable expertise. Outsourcing payroll can save you some money and provide peace of mind that your payroll is being taken care of by experts in the subject area.
