Administrative Functions That Don’t Bring in Money

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In our last blog, we discussed the administrative cost of employees. We pulled together some figures and shared with you the cost that is associated strictly from an administrative perspective. One thing we didn’t touch on was the functions that help bring that cost to such a high rate.

As we mentioned, the administrative functions of a business operation are required for the fulfillment of the production of goods and services. However, if you are a small to medium sized business, some of these tasks do not require a full time employee. For instance, if you have an office with 10 people, chances are you don’t need someone on full-time to train new hires in HR policies like sexual harassment and whistle blowing.

Employer Solutions Plus has long served the business community and thanks to this experience can quickly identify some administrative functions that could readily be outsourced to save the company unwise human capital investments. These roles are easily outsourced because having them in-house does not often offer a competitive advantage in the marketplace as they do not affect the productivity or culture of the business.

  • Payroll
  • HR Information Systems
  • HR Training
  • Benefits Administration
  • Employee Liability and Legal Administration
  • Compliance Officers
  • Tax Administration

We find that one of the most common reasons businesses are hesitant to outsource is because they are unsure if the quality of work that their internal team delivers will be matched. We can assure you that if you choose to outsource HR tasks through Employer Solutions Plus, you will not only receive the quality (check out our testimonials!) but we can help you become an employer of choice.

Contact us today to schedule a consultation and find out how we can help you streamline your business and impact the bottom line!

Administrative Cost of Employees

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What is the greatest asset to a business? It is not the building where it operates or the equipment that produces the goods or the orders. It is the individual employees who facilitate the day to day operations to make the business run. We know how highly valuable employees are – without them your business can not run. However, these valuable employees are also a huge expense.

Just how much do they cost? We’ve broken it down for you. Here’s the SAMPLE scenario – you are a 25 person company in a white collar industry. You have a $500,000 annual payroll with a per employee average salary of $20,000. Your annual turnover rate is 10%.

We will assume the following costs:

Payroll Processing, Tax and Administration $2,600
Payroll Delivery $300
401k Retirement Plan & Vendor Administration $3,500
Full Service Section 125 Plan & Vendor Administration $2,400
Employment Practices Liability Insurance $4,000
Total Vendor Cost $12,800
Staff Administration Cost $20,000
Total HR Administration Cost $32,800

So what do these sample numbers boil down to? Your administrative function just to process payroll and benefits is 6.56% of your entire payroll. Per employee, per year that is an average cost of $1,312. Over 6,150 transactions annually are required to accomplish this. Quite the reality check, right?

There are solutions however – small to medium sized business choosing to outsource these administrative functions can make drastic improvements to their bottom line but also to productivity.

What Business Expenses Can Be Deducted?

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Did I save my receipts? Can I deduct this? Will this be flagged? What if I get audited??

Do these questions sound familiar? They sure do to us! As business owners ourselves we completely understand the stress, the confusion and the pressure that tax season brings.

Using the guidance at IRS.gov, we have put together a basic guide for you to understand what you can and cannot deduct. Hopefully this helps reduce some of your stress as you prepare your tax paperwork for your accountant!

What qualifies as a business expense?

  • A business expense must be “ordinary and necessary.” Well that sure is confusing – what does that mean? If it is required to run your business – i.e. a cell phone, employee pay, insurance, office space – it counts.

What does not qualify as a business expense?

  • According to the IRS website, “The expenses used to figure out the cost of goods sold, capital expenses and personal expenses” do not count as business expenses. In general, you can’t deduct personal expenses. However, if you use something for both business and personal, you can divide the usage and deduct a percentage of the cost.

What if I use my home office or car for business purposes?

  • Here’s where it gets tricky, if you work out of your home you may be able to deduct things like mortgage interest, utilities, etc. For more specific information, review the Home Office Deduction guidelines provided at the IRS website. Car deductions are a bit more complex – you can find out mileage rates, and what is included and excluded here.

Hopefully our high level overview gives you a bit of clarity to navigate your way through tax season! Did you know that through our PEO partnerships and small business resources, Employer Solutions Plus can help find your business the perfect tax filing services? Professional help can assist you in streamlining your administrative functions and without having to memorize every single tax law you can focus more time on growing your business!

Contact us today to see how we can help!

What is the Average Cost of a Payroll Company?

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So, you’ve realized that in-house payroll processing requires you to hire an onsite payroll staff, buy and maintain payroll software, oversee the payroll department and ensure your business stays up to date with the ever-changing details surrounding payroll compliance. Ouch! How much is it to “hand that headache off to someone else?”

If you’re wondering what the average cost of a payroll company is, unfortunately there is no easy answer. It’s going to depend on a lot of details specific to your company. To give you an idea, here is how that number is often determined by a service provider:

Basic Costs

Basic services of payroll usually include calculating payroll and tax obligations for each employee, printing checks, depositing into employees’ accounts, project management and reporting.

The frequency of payroll each month and the number of employees is the largest factor in determining the basic cost of services.  Paychecks can be issued on a weekly, bi-weekly, or monthly basis and weekly payroll distribution will often cost more than monthly (because the payroll tasks outlined above need to be performed 4-5 times per month versus 1). You can pay as little as $25/month for basic costs if you have a small number of employees and as much as $150.00/month if you have a larger company, depending on your basic needs and frequency.

Tax filing assistance is usually offered at little to no charge at the year’s end, too.

Delivery Method & Additional Costs

The delivery method each pay cycle also plays a significant role in cost, especially if you have a lot of employees. Will paychecks be mailed to you at the end of each pay cycle, to distribute on site? Or will you need each check mailed to each individual employee? If your service provider has a special program that permits you to print and distribute checks internally, you can eliminate postage and handling costs all together.

Also, adding new employees may come with administrative fees per employee, or put your business into a new bracket for basic services. Basic services usually cover a certain number of employees, as there is a big difference between processing payroll for 5 employees each month and processing 25 employees each month.

Keep in mind that a payroll service provider will be an expert in payroll and will likely get the job done a lot more effectively and efficiently than you can each pay period. If you only have one employee, outsourcing could still be the better option. Getting fined for a missed payment or reporting error could end up costing more than the fees incurred by hiring someone else to handle it – and in most instances the payroll company will take full responsibility for errors!

Employer Solutions Plus represents a number of payroll companies in order to find the perfect fit for each of our clients. Call us at 727-698-6207 to learn more.

Payroll Software or Payroll Company – Which One Does My Business Need?

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Do you remember the days of only having to cut one check per month to yourself as the business owner? As your business grows, so does the number of employees which makes payroll (and other employee management tasks) difficult to stay on top of.

It’s at this time you begin to consider your options for operating more effectively and efficiently. Do I need payroll software or a payroll company?

Here are some things to consider with each:

Payroll Software

  • Payroll software helps ensure your employees are paid accurately and on time through automating the payroll process.
  • Reputable software is continually in the development/upgrade phase with new functionality and enhancements being added periodically; they’ll also keep up with compliance surrounding payroll legislation. This means that you won’t have to buy new software each time a new law is passed or a certain method is required for reporting.
  • You can stop writing paper checks with payroll software; payroll can be deposited directly into each employee’s personal account.
  • Each business has specific needs, which is why there are so many different types of payroll products available. There’s no “one size fits all” software.
  • Payroll software is often an affordable solution for limiting the amount of administration and operating more efficiently in the workplace. Some software has a onetime cost, whereas others are provided on annual or monthly subscriptions. Some charge per employee.
  • Software doesn’t “do it all.” You will still need an administrator to enter information and oversee payroll. Depending on the complexity of the software, extensive training may be required to use it.
  • Smaller firms with a stable and salaried staff and minimal tax obligations may be better off processing payroll on their own with the help of software (vs. the option of hiring a payroll service provider). But, keep in mind that a payroll error and IRS penalty can grossly affect your bottom line. How likely are you to make an error or overlook something?

Payroll Company

  • For large companies especially, outsourcing payroll to a payroll service provider is anattractive and valuable alternative to in-house processing.
    • A payroll company’s basic services include calculating payroll and tax obligations for each employee, printing and delivering checks, and providing management reports. Paychecks can be issued on a weekly, bi-weekly, monthly, or even yearly payroll basis.
    • Using a payroll service provider can be especially helpful if you have to pay payroll taxes for multiple states – let someone else handle it!
    • Added benefits of utilizing a payroll company can include services such as automatic check signatures, issuing W-2s, and the direct deposit of checks. Not everything is included in the “basic costs.”
    • Filing state and federal payroll taxes for your business is typically offered at little or no cost. However, they likely will not calculate your local or city taxes – inquire about this before beginning any new relationship so that nothing falls through the cracks.
    • Each pay period, payroll data has to be “called in” to the service provider. This can be done over the telephone or internet through online payroll reporting.

Do you know which one is right for your company yet? As we said earlier, there truly is no “one size fits all” approach, which is why Employer Solutions Plus represents vendors in multiple categories.

When comparing the cost of each, you need to look beyond the initial price tag and ask yourself how much time you will spend managing the payroll process each month. As you know, time is money and if payroll is pulling you away from your revenue generating activities week after week it may cost you a lot more than you think to manage in-house!

Contact our team to discover which option is best for your particular business.

Can You Switch to a PEO After the New Year?

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The New Year is quickly approaching and if you’re a business owner you may not have gotten all of your ducks lined up in time for January 1. Were there things you wanted to do or change in 2014 that have fallen through the cracks and won’t be ready in time?

There are lots of vendor switches or new services contracts that begin on January 1 out of the convenience of having annual contracts, but in this article we’re addressing one particular type of services company: the PEO.

Whether you’re a company looking to engage in a PEO contract for the first time, or a company that already works with a PEO but is looking to make a switch, you are probably a little bit nervous about the transition. Is it going to be an administration nightmare? Do I have to wait until next year to engage in a new contract because there’s no time left in 2013?

In short, no. It’s not going to be an administrative nightmare, and contrary to common misconception, a new PEO contract can begin at any time of the year. If you’re unhappy with your current PEO or in immediate need of cost reduction, you really shouldn’t wait an entire year to correct your situation.

Employer Solutions Plus is skilled at analyzing and delineating current PEO contracts to ensure the easiest “exit strategy” possible. We review all payroll taxes to ensure that no amount of money has been put toward SUTA, Social Security, Medicare, etc. in advance, and that the amount of health insurance deductibles that have already been paid in 2014 don’t end up being forfeited.

We also work with a handful of PEOs that are willing to offer credits for taxes or benefits already paid if there is no way to ensure a smooth transition without overlapping or duplicated costs. So, while the most convenient time of the year would have been January 1, know that you are not out of luck!

Employer Solutions Plus can identify the most convenient (but also the most cost-effective) time frame for making the switch! Call us at 727-698-6207 if you’d like some more information.

The Most Important Question to Ask When Shopping for a PEO

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Shopping for a PEO? If so, you’ve got a lot of things to compare and the situation may feel as if you’re comparing apples to oranges. Different pricing structures, different services, different benefits … So much to look at and consider!

One of the biggest mistakes that business owners make when shopping for a PEO is selecting the one with the best overall price tag. The most important question to ask before signing a contract is “Will you ‘unbundle’ your billing?” Breaking down the “all-encompassing plan” will permit you to know exactly what you’re paying for, and how much – making the comparison from one PEO to another a lot easier.

We know that analyzing proposals takes time away from your busy day and profitable business activities, but forgetting to ask this simple question and simply selecting the best-priced can cost you in the long run!

At Employer Solutions Plus, our dedicated staff of PEO experts can prepare a custom analysis of proposals for you upon request and we’ll break down each and every component of the PEOs’ proposed contracts. Benefits to benefits, payroll to payroll, admin to admin – what you’re paying for should be clear!

Clients of Employer Solutions Plus save themselves time, money, and stress. Call today to take the guesswork out of PEO cost analysis: 727-698-6207.

How Do PEOs Work With You to Lower Workers Compensation Rates?

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Many PEOs provide workers compensation insurance through the co-employment relationship, which takes some liability off your plate as a business owner. Because liability is shared, it should be in the PEO’s best interest to limit injuries, increase workplace safety and simultaneously lower your workers compensation rates.

A great PEO will work with you in three distinct ways to accomplish this:

Hands-on Risk Management: In high risk industries especially, it’s important for risk managers to see the workplace and your ways of conducting business firsthand. Risk assessments help identify areas that are an “accident waiting to happen” or pose a potential threat to you and your employees. Did you know that the small task of employee hand washing (or lack thereof) is the single most cited factor in outbreak investigations?  Your business needs to be equipped to stand up against aggressive lawyers in the event of a lawsuit. Your business may have overlooked areas that could result in a lawsuit or claim.

Safety Programs: PEOs can design a workplace safety program, and even organize and conduct safety trainings to ensure that employees are properly educated, aware of potential harms, and perform work more cautiously. It has been proven that when employees fully understand safety manuals and have resources (such as live demonstrations) available to them for additional help, workplace safety increases. Fewer injuries… fewer claims… fewer dollars to spend on workers comp!

Claims Management: Several claims against your business, and several lost claims, will undoubtedly increase your workers compensation rates. From an insurer’s eyes, you’re considered high risk.  PEOs manage claims for several million workers across the country as part of their service to small businesses. They are experts in risk management and go to bat on behalf of your business if and when a claim arises.

Ask what types of safety programs would be implemented or enhanced by your PEO in order to lower the number of injuries or claims from your workforce, and be wary of the PEO willing to sign you on without a thorough analysis.

If a PEO is willing to sign on your company without a thorough analysis, this may be a red flag. PEOs should ALWAYS care about your workplace safety and the amount of risk you have.

To learn more about risk management, safety programs, claims management, and what the ideal PEO relationship should look like, contact Employer Solutions Plus.

5 Ways to Cut Operational Costs

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Running a 1-man shop was pretty great, wasn’t it? Operational costs were relatively low …. no office lease, no employee benefits, no payroll, just one or two insurance providers.

However, most successful businesses grow over time. From one employee …. To two…. To three…. To one day waking up and having a department of 20 fulltime employees!

Gone are the days when your business’ monthly accounts payable page consisted of your own health insurance and an occasional dining expense for client entertainment! But chin up; an increase in operational costs is often a sign of growth. It’s important not to get tied up in the growth phase though, and forget about the expenses that are piling up. Did you know that keeping ongoing and recurring expenses under control is an important part of ensuring continued growth and success? It’s not just about increasing income!

Employer Solutions Plus recommends analyzing these 5 operational expenses. Decreasing them will result in a bigger and better bottom line each month.

  • Payroll Administration: Payroll fees often depend on the number of employees that you have and the number of payroll periods each month (which determines the number of checks prepared each month). The market is highly competitive though and pricing should be relatively negotiable. Do you have unnecessary charges each month for payroll services you aren’t utilizing? Could you save $2.00 per paycheck each month by switching to another provider? It may not seem like a lot, but if you have 60 employees that get paid on the 15th and 30th each month, that’s 120 checks – you’ll save a few hundred dollars a month by switching!
  • Lease Agreements: Landlords are more willing to renegotiate a lease in an economic downturn or when an existing tenant inquires about the rent. Have you been a great tenant for several years now? Use that to your advantage! Your landlord would probably prefer that you stay put versus starting over with someone new!
  • Credit Card Processing: If your business accepts credit cards, you’re probably paying your processor too much for convenience. We understand that convenience comes with a price, but like payroll administration, credit card processing is a very competitive market.
  • Benefits: Health insurance is a large and recurring expense for most businesses. Click here to read a little bit more about ways to lower your company’s health insurance costs – immediately!
  • PEO: Do you work with a PEO? If so, they’re probably saving you a lot of time and money when it comes to employee management and HR administration. But, there are nearly 800 PEOs in the United States – How do other PEOs compare in price? Is there a better fit for your organization?

Don’t have time to shop around? At Employer Solutions Plus, we represent multiple providers in payroll administration, PEO solutions, and benefits. This allows us the flexibility to customize a cost effective solution to meet the individual needs of our clients (while saving you money, too!). Contact us to discuss your business’ expenses; everyone has some room to save!