NAPAA - National Association of Professional Allstate Agents, Inc.

usiness tips
Speaking of Payroll
by Charles Parkhurst
When an Allstate agency opens its
doors there are many things to consider:
hiring employees, putting human
resource services in place, obtaining the
appropriate insurances and, of course,
deciding how employees are going to be
paid. This article will address the issue of
payroll by focusing on some of the details
you should weigh when determining the
best course for your agency.
In general, there are three ways to
handle payroll: doing it in-house, using
a PEO service, or using a payroll vendor.
In-house
When any company chooses to process
payroll internally it is usually for
one reason and one reason only - cost!
People generally go into business for
themselves to fulfill their lifelong dream
to succeed, not to calculate gross to net
deductions, remit tax payments, or create
and file the required quarterly and
annual reports. But many companies do
just that. While there are programs like
QuickBooks that help relieve the burden,
they generally come with very little
support, and many small businesses do
not realize that they need to pay to update
the tax tables on an annual basis.
Plus, many in-house accounting programs
are designed to have the employer
enter information on a regular basis.
They are not meant for the procrastinator
who wants to catch up on a quarter’s
worth of accounting information the
day before the quarterly return is due.
When somebody tells me they are
considering in-house payroll, I ask them
to break down their weekly schedule for
me. The reason I ask is because if you are
going to process payroll internally, you
need to allocate the proper amount of
time on a regular basis. Because a busy
schedule might prevent you from focusing
on payroll issues during business
hours, it might be worthwhile for you to
investigate alternative solutions that will
better utilize your time. With the production
pressures facing Allstate agents
today, it is crucial to focus on ways to
write more new business, not calculating
payroll and tax data.
PEO
A professional employer organization
or a PEO is an all-in-one solution.
When you choose a PEO your payroll,
insurances, 401(k), and some human resource
functionality will be completely
outsourced. PEOs are the best fit for
companies that may have trouble obtaining
workers’ compensation.
There are two key elements of a PEO:
1. The employees are not technically
yours; to obtain better insurance rates,
the company is grouped with other similar
businesses. Some owners feel a lack of
control over their payroll.
2. A PEO will typically charge an administration
fee based on the size of your
payroll. Figuring out how much you are
actually paying a PEO can be tricky. The
easiest way is to manually calculate your
employer taxes, add your payroll net, add
in your workers’ comp and then subtract
that number from the total debit you received
from the PEO. Sound easy
When people ask me about choosing
a PEO vs. a payroll vendor, I often compare
a PEO to marriage and a payroll
service to dating. You can leave a PEO,
but if you are taking advantage of all of
the services a PEO can offer, such as payroll,
insurance, 401(k) and other benefits,
you may have to find a few companies
to take the place of the PEO. Using a
payroll vendor gives you the option to be
more flexible as your business changes. If
your business outgrows a payroll vendor
or 401(k) provider, you can simply make
a change and switch vendors.
Payroll Vendor
Using a payroll vendor is an economical
option that many businesses choose. The
payroll vendor will handle the payment of
federal, state, and local payroll taxes, file
your quarterly returns and prepare your
W-2s at year-end.
The biggest difference between using a
payroll vendor instead of a PEO is that a
payroll vendor will file all of your taxes off
of the client’s federal and state Tax Identification
Number.
If you choose a payroll vendor you
probably want to know what, if any,
additional services are available. As an
Allstate agent, there are many payroll
vendors to choose from, some of which
sell insurance, which may compete with
some of the products you sell. Many
payroll vendors also offer other services,
such as handbooks and 401(k), in addition
to health insurance.
Unlike a PEO, most payroll companies
sell these items à la carte. However,
many companies have found that they
receive a better quality of service by using
different vendors for payroll, insurance,
and 401(k). And most importantly,
this model offers you more flexibility
to make changes.
These are three different methods you
can use to take care of your payroll and
tax preparation needs. It is important to
keep in mind that while cost is important,
so is peace of mind. Many payroll
clients tell me that while they appreciate
paying a competitive rate, it is the accuracy
and good service that keeps them
coming back year after year. Ef
Charles Parkhurst is a District Sales Manager
with Ovation Payroll. If you have
questions regarding this article or general
payroll questions, please contact him by telephone
at 866-341-3504 or by e-mail at
cparkhurst@ovationpayroll.com.
28 — Exclusivefocus Summer 2011