Payroll Service?

[Tonearm]

Does anyone here use a payroll service? I have 3 employees and I'm considering signing up with Advantage since I've read very bad things about Paychex and ADP.

Do you think it's worthwhile to sign up with only 3 employees?

[mattb]

An advantage is that they calculate and make all of the tax payments for you. They take care of any penalties if they miscalculate. We waited until we had about 20 employees to switch. Based on the cost vs. what we paid in penalties for figuring the taxes incorrectly we could have paid for the service. We looked at both PayChex, ADP, and Paycor. It's pretty much a commodity business so I think you would be ok with any of the bigger companies. If you go paperless the cost is fairly low.

[ssgumby]

We use quickbooks online payroll. Only 19.99 a month and very easy to use from anywhere you have internet access. It calculates all taxes for you and handles all the forms needing files. You still need to print the form and file it and you need to pay your taxes, but that is very easy and only takes a few minutes. For fed payroll tax it allows you to pay it direct though them.

[jsinger]

I've read very bad things about ____ and ___.

Both firms, especially Paychex, have been very successful. Both continue to thrive in this weak economy. What have you heard that's "very bad" about them?

I'm sure they're not cheap for only three employees. There's a fair amount of set-up involved whether the client has 3 or 30 employees.

Given the state of the economy I'd be reluctant to outsource anything I could do myself.

[Tonearm]

The bad stuff I read was on eopinions.

I spoke to an Advantage rep and we came up with $61 per pay period for my situation. That isn't paperless though so it might be lower for that.

For 3 employees, is payroll stuff pretty easy? It sounds like a lot of stuff to keep track of, but maybe it isn't so bad once you have it figured out?

[ssgumby]

We have 3 employees, it takes me about 2 minutes to process payroll for them and direct deposit the money. Takes another minute to print all their stubs.

Takes 5 minutes each month to pay taxes. About 5 minutes each quarter to print and file forms.

Took me maybe an hour to get it all setup initially as I had no clue what I was doing and needed to get them to help. Their customer service is great.

Here is my process for paying employees :

1. Login
2. Select pay period from dropdown
3. Enter hours next to each employee
4. Click "Send and Save"
5. Click "Print Stubs"
6. Walk to printer and get stubs.

[jsinger]

$61 per pay period isn't cheap. How often do you pay employees? Consider paying every two week to save a bit. Payroll for three would be easy once you get the hang of it. Mostly repetitive.

In bad times you want to watch every cent even if it takes more effort. Best to assume your business may get smaller, not larger.

Best to outsource in good times and bring work back in-house in bad times.

[Slade]

I have outsourced myself and my one employee to employee leasing company, AdvanceHR. It cost me $50/employee to get started.

Print time sheet.
Fill in time sheet.
Sign time sheet.
Fax time sheet to payroll company.
Receive direct deposit in our checking accounts.

They draft the total including their processing fees, employer taxes, unemployment thingies, and such from my company checking account.

I now have zero employees for tax purposes, and they deal with all the paperwork.

Their total fees for the both of us *full-time* is less than what I was paying to employ my one guy part-time through MegaForce(local temp company). And I was getting a discount from the temp company!

[jsinger]

$61 per pay period isn't cheap. How often do you pay employees? Consider paying every two week to save a bit. Payroll for three would be easy once you get the hang of it. Mostly repetitive.

In bad times you want to watch every cent even if it takes more effort. Best to assume your business may get smaller, not larger.

Best to outsource in good times and bring work back in-house in bad times.

[Tonearm]

"I now have zero employees for tax purposes, and they deal with all the paperwork."

That sounds very interesting. Are you telling me a company like mine could sign up with a company like AdvanceHR and end up with 0 employees for tax purposes, etc.?

[Slade]

If you're in the US and they cover your state, yes. *

Google these:

PEO (professional employer organization)
employee leasing

* IANAL or Tax Advisor. Ask yours.

[edited by: lorax at 1:08 pm (utc) on Oct. 10, 2008]

[Tonearm]

I read the PEO wikipedia page and it sounds really good. Thanks a lot for the info. I've got calls into a bunch of PEO companies that serve California.

Any downsides to this?

[edited by: Tonearm at 3:02 pm (utc) on Oct. 11, 2008]

[jsinger]

"Any downsides to this? "

I would think a lot of downside.

Risk is that some states may consider employee leasing to be sham transaction when used for some purposes under some circumstances. Courts may rule that you are really an employee of your own company (not far fetched, eh?).

I haven't heard much about employee leasing in years. About 8 years ago, I knew of one firm on the American Stock Exchange where all the employees worked for a captive leasing company that was owned by the firm's CEO! The leasing firm only had one client. What a conflict of interest I thought! Soon afterward that leasing gimmick was disbanded.

Talk to a local employment lawyer before proceeding.