Small business owners can always conduct payroll processing independently, but the prospect of gathering employee information, distributing paychecks, and identifying applicable taxes and withholdings can be overwhelming. There are a variety of alternatives to DIY payroll, including regular PEO payroll providers and payroll software. However, if your company needs other services, such as human resources, compliance, and taxes, consider working with a professional employer (PEO).
What exactly is a PEO payroll?
When a company uses a PEO for payroll, the PEO becomes a co-employer responsible for managing the client’s payroll administration and employee taxes using its tax identification numbers rather than the client’s.
The PEO is often in charge of payroll-related tasks such as paying wages, depositing employment taxes, and giving W-2s to employees. PEO payroll occasionally assists with the administration of payments to complete- and part-time employees, vendors, and contractors. Your company is still in charge of day-to-day operations and management.
Payroll through a PEO
Whether you’re a new business considering a PEO or a business owner wishing to manage your payroll administration more efficiently, there are numerous critical pieces of information and decisions to make to ensure your payroll runs properly.
- Employer identification number (EIN) and state tax identification number. Your company requires a unique identification, and an EIN is essential for federal filings to handle payroll and submit payroll taxes. In some states, an EIN is sufficient; however, you may also require a state tax ID in others.
- Employer details. Each employee must fill out Form W-4. You can use that form to determine how much federal income tax to withhold from your employees’ paychecks. Employees must also complete their state withholding forms.
- Payroll planning. You must establish your company’s payroll frequency, which affects how frequently you pay your employees. Weekly, bimonthly, semimonthly, and monthly payrolls are the most common. Check that your timetable complies with state and industry regulations.
- They are withholding taxes. Your company must compute and withhold the appropriate amount of taxes from each paycheck. Once your calculations are correct, ensure your employees know how to read their pay stubs. In the long run, this can increase employee trust and contentment.
Taxes and Payroll
Benefits of Outsourced Payroll Processing
Some PEOs provide payroll processing services, which can help HR professionals be more productive by eliminating manual administrative processes. Keep in mind that some PEOs solely handle payroll. You must still prepare the hours and paycheck for submission to the PEO for processing.
Cons: There is no guarantee of compliance.
If a PEO fails to remit or file taxes on your behalf correctly, your firm may face fines or penalties for noncompliance. The majority of workforce management companies provide payroll processing with tax compliance. As the reporting agent, the provider will calculate, file, and pay your taxes. Furthermore, if the supplier offers a tax compliance guarantee, they will pay any penalties or fines due to an error.
Conclusion
PEO payroll providers have advantages and disadvantages, and the appropriateness of such services varies with each organization. There are numerous benefits to using a PEO to streamline these procedures, but keep in mind that the firm will have to give up some control and flexibility. If you determine that a PEO is ideal for your company, Husys is one of the top options to explore.