Companies benefiting from outsourcing payroll

February 28th, 2007

4Starting a business takes money, hard work and a passion to bring a new service or product to market. But unless the owner is opening an accounting business, that passion probably doesn’t extend to the drudgery of doing payroll.
Keeping it simple: Sharon Maurer, co-owner of apparel-imprinting company Giraffe-X Graphics near Fort Harrison, handed over payroll duties for her seven employees to Paychex. “It’s one of the best things I’ve ever done,” she said. – Alan Petersime / The Star

“The average new business owner has to file about 28 federal tax forms in the course of a year,” according to John Littler, regional sales manager for Paychex, a national payroll services company with about 4,000 clients in Indiana and offices in Indianapolis and South Bend.

Sharon Maurer managed her Lawrence company’s payroll for a couple of years after starting Giraffe-X Graphics in 1993. Maurer kept track of the tax withholding, printed the checks for employees and made the tax payments for employees of her company, which imprints apparel such as T-shirts.
But then she received what she called great advice: As her business grew, payroll would become increasingly complicated and take her away from her other duties as president. She now employs Paychex to manage payroll for her seven employees, who work in a converted mule barn at 5746 Wheeler Road near the old Fort Harrison.
“It’s one of the best things I’ve ever done,” Maurer said.

Human resources consultant Mark McNulty also recommends that business owners consider outsourcing their payroll. McNulty, president of HR Dimensions in Indianapolis, said the trend during the past 15 to 20 years has been to outsource.
Keeping track of all the taxes and forms “seems more hassle than it’s worth,” he said. “I don’t see why anyone would want to do their own.”

Herman paid her accountant to do the payroll for the first quarter of operation, but then she took it over. She said she likes knowing what taxes are owed and when they are due because it helps her manage the business’s cash flow. Deductions must be made for Social Security and Medicare payments, as well as federal, state and local income taxes.

She uses QuickBooks software to manage the deductions and print paychecks. It’s a complex process because not all the deductions go to the same place at the same time, Herman said. QuickBooks prints a report that tells her how much is owed each time, and she writes a check or makes an electronic fund transfer.
“I am astounded by how hard it is to pay taxes,” said Herman, whose company now has 12 employees.

The payroll process at Hedlund’s Ace Hardware, 2369 E. 62nd St., is more “old school.”
Store manager Tony Hedlund said the business keeps track of payroll in a handwritten ledger and has been doing it that way for 50 years. A check machine, similar to those that banks use to make cashier’s checks, stamps the amount on the checks, which then are signed.
Their bookkeeper, who is in his 80s, has been handling payroll in that fashion for 50 years, Hedlund said, adding that there’s no reason to change a system that works. He said he would consider eventually using a computer, but “we’d never go to a service” for payroll.

Whatever method is used for payroll, accuracy is vital.
There are penalties for discrepancies in deductions and tax payments, according to Susan Kline, an attorney who specializes in employment law for Baker & Daniels, an Indianapolis law firm. For instance, if an employee is shorted on overtime pay, the business can be liable for triple damages.

Payroll companies understand this, and therefore keep up-to-date on changes in the laws, according to Don McLoughlin, vice president of marketing for ADP Small Business Services, a national payroll company with an office in Indianapolis.
“Small-business owners tell us they wear a lot of hats,” McLoughlin said.
Outsourcing their payroll could allow them to take off one of those hats and concentrate on growing their business.

By Jim Lindgren
Star correspondent


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Entry Filed under: Why Outsource?