Do Small Businesses Need Payroll Software for Less Than 10 Employees?
Andrew Moranon September 21, 2022.
Running a small business with fewer than ten employees might not seem all that difficult—until you realize that you need to calculate, manage, and execute payroll on your own. But this does not have to be a solo crusade as the latest payroll software can ensure successful uninterrupted payroll management. However, is it really necessary for a tiny company with a handful of employees?
Everything from taking care of benefits to paying employees on time (and by the right amount), payroll software offers various advantages for your company. Keep reading to learn more.
Advantages of Payroll Software Over Manual Processing
Payroll software offers a broad array of advantages for small businesses as today's programs can run your organization easier and smoother. Here are just four distinct advantages for any company—large, small, or in between:
1. Paying Employees
Relying on payroll software to issue paychecks to employees can become simplified and more efficient. Since it is critical to pay your staff on time and the right amount, the suite of digital tools can take into account a wide range of aspects, including payment method (direct deposit or physical check) and payment schedule (weekly, bi-weekly, and monthly).
This is perhaps the most important aspect of payroll compliance since businesses can face fines and endure legal disputes, particularly when jurisdictions have their own tax and labor laws.
2. Automating Processes
Manually operating payroll can come with a lot of headaches and many mistakes. From misclassifying employees to filling out the wrong forms, many errors can arise by relying on human input for something as crucial as payroll. Therefore, automating processes associated with payroll can be of tremendous importance since it will reduce your mistakes. Plus, automated payroll can afford you more time and energy to concentrate on ways to boost revenue and grow your outfit.
The manual vs automated payroll debate is a simple one to settle.
3. Tracking Benefits
At first, it might be easy enough to track employees' overall compensation packages if you only need to do so for one or two employees. However, when your staff continues to increase in number, payroll software can better track a worker's plethora of benefits, be it health care coverage or 401(k) contributions.
This makes it easier to manage when more workers join your team. It also helps when you are working with a financial institution or an insurance provider.
4. Calculating Tax
Calculating the necessary tax contributions and deductions can be a time-consuming task. Indeed, there are many different types of contributions, deductions, and other tax and compliance scenarios that small business owners need to keep track of to ensure they are in compliance with federal, state, or local tax laws.
In addition, employees will have their own tax structures as well:
- Employee The company is obligated to withhold income tax, Medicare, and Social Security from wages paid.
- Independent Contractor The small business is not required to withhold taxes.
- Temp Temporary workers usually work under 1,000 hours for your business, but it is up to you to file payroll taxes and send a W-2 form.
- Intern If the person participating in an internship is being paid, the employer is still required to deduct federal and state taxes from his or her paycheck.
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Plan for the Future
It is true that a small business can calculate, manage, and execute payroll without software. However, without the use of software, it takes more time, effort, and organization to ensure that everyone is paid on time, the right taxes are deducted, and people are classified correctly.
This leaves two drawbacks: time and the possibility of mistakes. This is especially true when the business and the number of employees grows, which can make manually managing payroll efficiently no longer a feasible policy. Indeed, no matter how intimate you are with figures and how organized you may be, when you have other employees to look after, mistakes are bound to happen!
By incorporating payroll software into your day-to-day activities, small businesses can feel confident the right forms are filled out and filed, paychecks are executed, and benefits are doled out to staff.