One of the biggest questions we get is whether or not a company should use a check issuing / payroll service for issuing out payroll checks to employees, or if they should do it themselves. The clear advantage for a company doing it themselves is that they save some money in service fees that the check issuing and payroll service company would typically take. The second advantage would be the same advantage that any service being in-house offers: a feeling, perceived or real, or more control. But mostly, this is where the advantages stop and the disadvantages reign free. Like doing anything in-house, you acquire a lot of risk and responsibility that you must account for.
You have to manage that. Yep, it’s a standalone department that requires training, approving vacations and sick days, salary, benefits, maybe a 401k? You have to manage that. And that’s a lot of work as you probably already know. An entire department on top of the ones you may already have will create focus issues in general for the upper level executives. No department just runs itself, everything in one way or another must be managed and oversaw.
You have risk. And if you fail on any risk, the accountability that falls upon your company is huge.
You must file quarterly reports. You must withhold taxes for each employee you pay out. You must make sure you send out W-2’s at the end of the year in a timely manner. You must make sure health insurance and any investment plans are properly accounted for. You have disability and inevitably you will have unemployment that will need to be distributed.
That’s a lot of risk. And these aren’t risk you want to lose on because the IRS does not look kindly on errors in the above fields. In fact, errors lead to audits and worse things. This takes us back to the prior point that the situation, when in-house, must be managed.
When you use a payroll service or check issuing company, you eliminate those risk and can be worry free. Sure, there is a fee, but isn’t it worth it to let the check experts do what they do?