Small businesses often have to cut corners at every turn in order to keep on top of their budget. This means that many business owners often have to take on many jobs that larger corporations can afford to pass on to others to do. However, there are times when even in a small business environment it may be more practical to spend the additional money and have an expert do the work for them. This is usually true when it comes to handling the company payroll. Here are a few reasons why your small business needs a payroll service.

Reduction of the Risk of Errors

When you start a business enterprise you are usually on a pretty tight budget so you'll try to either contract out for extra help when you need it or handle all of the paperwork yourself. However, when it comes to payroll, the IRS has some pretty strict requirements that define how an employee is to be classified. Misclassification of an employee (using contracting status in order to avoid paying health benefits, for example) can incur expensive penalties. It's important to stay within the confines of the law so that your attempt to save money does not end up costing you more. Payroll services help you to avoid making costly mistakes resulting from a lack of knowledge of proper procedures.


Another reason why your small business needs a payroll service is to ensure that everything is consistently done on time. Small business owners are required to withhold Social Security, Medicaid/Medicare payments, federal, state, and local taxes from every paycheck. These withholdings are to be paid with your quarterly filings and incur heavy fines if you are late. When you use a payroll service these withholdings will consistently be made on time so you can avoid penalties of this kind.

Ensuring That Your Health Care Obligation Is Taken Care Of

Because of the Patient Protection and the Affordable Care Act of 2010 many small business owners may not be fully aware or understand their legal obligations and don't know how to adjust to these new legal changes. Not only is paying for Medicare/Medicaid a necessity for higher earning employees but the rates have also changed because of it. With a payroll service, you can avoid any risk of incurring a non-compliance penalty, which could end up costing you more money than you would have saved if you did not hire a payroll service.

Running a business can be one of the most expensive ventures you can ever take. Not only do you have to be knowledgeable about your industry, there are marketing fees, legal issues, and additional jobs that you will have to manage that you may lack expertise in. While you can wear many hats, if the hat doesn't fit well it could be very costly in the long run to handle yourself. Of all the reasons why your small business needs a payroll service probably the most important one is to help you avoid mistakes that could cost you more in the end.