America's SBDC Florida UNF | Payroll

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Payroll, Your Responsibilities and Options.

Payroll is the sum of all financial records of salaries, wages, bonuses and deductions for an employee. Payroll is vital because payroll and payroll taxes considerably affect the net income of most companies and they are subject to federal and state laws and regulations. From a business viewpoint payroll is an essential department as employees are responsive to payroll errors and irregularities. The primary mission of the payroll department is to ensure that all employees are paid correctly and timely with the right withholdings and deductions, and to ensure the withholdings and deductions are remitted in a timely manner. This includes tax withholdings, and deductions from a paycheck.

Every employer is responsible for paying the employer’s share of payroll taxes, for depositing tax withheld from the employees’ paychecks, preparing various reconciliation reports, accounting for the payroll expense through their financial reporting, and filing payroll tax returns. The Employer’s Tax Guide Publication 15 aka Circular E can be found on the IRS website.

Businesses have the option to outsource their payroll functions to an outsourcing service. These can normally reduce the costs involved in having payroll trained employees in-house as well as the costs of systems and software needed to process a payroll. Where this may reduce the cost for some companies, others may have a bigger bill to outsource their payroll if they have a special designed payroll program or payouts for their employees. Restaurant payrolls which typically include tip calculations, deductions, garnishments and other variables can be difficult to manage especially for new or small business owners.

The tasks that can generally be expected of just about all payroll service providers are as follows:

  • Printing of employee pay checks on time for payday
  • Direct deposit of pay into employee bank accounts, when desired
  • Appropriate calculation and withholding of federal, state, and local taxes
  • Calculation of Social Security and Medicare payroll taxes to be paid by
  • Filing of quarterly 941 reports and annual 940 payroll reports
  • Depositing of withheld amounts with tax authorities
  • Printing and filing of year-end employee W-2 or 1099 forms.

Additional services may be offered and vary from firm to firm.

  • Management of retirement and savings plans
  • Health Benefits or cafeteria plans
  • Timekeeping, either online or in the physical form of time clocks
  • Producing export files containing payroll/general ledger data to be imported into a client’s accounting software
  • Human Resources (HR) tracking/reporting
  • Workers’ Compensation Insurance intermediary

A completely different option would be outsourcing your entire labor force to a Professional Employer Organization known as a PEO. A PEO provides employee management tasks like benefits, payroll and worker’s compensation, recruiting, risk/safety management along with training and development. The PEO hires the employees, making them the employer of record for tax and insurance purposes, and the business becomes the co-employer, directing the daily activities of the employee.   This is also known as employee leasing. The key service is usually providing the workers’ compensation insurance coverage at a much lower cost than the business can obtain.

Whether you provide payroll services in house, from a service organization, or lease your employees from a PEO, you should always understand what your responsibilities are and the implications to you and your business should you fail to cover those responsibilities.

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