usiness tips Speaking <strong>of</strong> Payroll by Charles Parkhurst When an <strong>Allstate</strong> agency opens its doors there are many things to consider: hiring employees, putting human resource services in place, obtaining the appropriate insurances and, <strong>of</strong> course, deciding how employees are going to be paid. This article will address the issue <strong>of</strong> payroll by focusing on some <strong>of</strong> 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 <strong>of</strong> 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 <strong>of</strong> 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 <strong>Allstate</strong> agents today, it is crucial to focus on ways to write more new business, not calculating payroll and tax data. PEO A pr<strong>of</strong>essional 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 <strong>of</strong> 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 <strong>of</strong> control over their payroll. 2. A PEO will typically charge an administration fee based on the size <strong>of</strong> 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 <strong>of</strong>ten compare a PEO to marriage and a payroll service to dating. You can leave a PEO, but if you are taking advantage <strong>of</strong> all <strong>of</strong> the services a PEO can <strong>of</strong>fer, such as payroll, insurance, 401(k) and other benefits, you may have to find a few companies to take the place <strong>of</strong> 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 <strong>of</strong> 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 <strong>of</strong> a PEO is that a payroll vendor will file all <strong>of</strong> your taxes <strong>of</strong>f <strong>of</strong> 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 <strong>Allstate</strong> agent, there are many payroll vendors to choose from, some <strong>of</strong> which sell insurance, which may compete with some <strong>of</strong> the products you sell. Many payroll vendors also <strong>of</strong>fer 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 <strong>of</strong> service by using different vendors for payroll, insurance, and 401(k). And most importantly, this model <strong>of</strong>fers you more flexibility to make changes. These are three different methods you can use to take care <strong>of</strong> your payroll and tax preparation needs. It is important to keep in mind that while cost is important, so is peace <strong>of</strong> 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
You wouldn’t want your clients talking to these guys. So why would you use a payroll service just like them As an endorsed provider <strong>of</strong> <strong>NAPAA</strong>, Ovation Payroll is dedicated to providing each agency with award winning service, their own dedicated payroll specialist, and a competitive rate. “I switched to Ovation and instantly experienced faster and easier payroll processing at a lower cost” Scott E. Sileo The Sileo agency LLC. For more information contact Ovation today. Charles Parkhurst Ovation Payroll 866‐341‐3504 cparkhurst@ovationpayroll.com Summer 2011 Exclusivefocus — 29
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