COVID-19 is changing payroll. Are you up-to-date with the latest compliance laws? You may want to evaluate your current payroll processing model
If you’ve managed to stay afloat during the COVID-19 crisis, how you do payroll is even more critical than ever.
The escalating coronavirus rates are pushing employers to adopt alternative employment strategies, such as telecommuting and remote work. It has also caused various employment law changes at the federal, state, and local levels.
From a payroll standpoint, these changes affect:
- Paid sick or family leave
- Unpaid leave
- Compensation for quarantined employees
- Compensation for non-quarantined employees
- Compensation for nonexempt employees
- Compensation for exempt employees
- Salary/wage adjustments
- Full- and part-time employees
- Furloughed employees
- Terminated employees, whether voluntary or involuntary
- Final paychecks
- Expense reimbursements for onsite and remote employees
- Benefits administration
- Paycheck deductions
- Payroll tax withholding, payment, and reporting
3 reasons to evaluate your payroll processing model
Due to the aforementioned changes, payroll has become more complicated for small businesses. Not only must you ensure compliance with regulatory changes but also voluntary policies enacted at the company level.
2. Remote work
Prior to the coronavirus, many small businesses didn’t consider remote work as an employment model. Now, unless the employee is an essential worker who MUST physically come into work, most employers are shifting their employees to the remote workspace. If you’ve transitioned your onsite staff to remote, then this move will impact your payroll in some way.
3. Payroll administration cost
You must pay your employees for services rendered, but it costs money to execute that function along with your other payroll responsibilities. And with the future being so uncertain, small businesses need to exercise a lot of caution when it comes to spending. So, the question is: are you utilizing a payroll processing model that’s economical and capable of meeting your current payroll needs?
Evaluating your payroll processing model: In-house vs. outsourced
With the in-house model, you have your own internal payroll team that handles your payroll responsibilities. This includes salary/wage calculations; paycheck deductions; benefits administration; payroll tax withholding, remittance, and reporting; and other payroll administration duties.
Questions to ponder when determining the viability of your in-house model:
- How competent is your payroll team? Can they skillfully navigate the changes brought on by COVID-19?
- How much time and money is it costing you to switch your onsite payroll team to remote? How much training will your remote payroll team need?
- How is your payroll team adapting to the remote work environment?
- How is your remote payroll team responding to inquiries from managers and employees?
- How much are you spending to maintain your in-house payroll team, including regular salaries/wages, overtime, and benefits?
- What advantages are you deriving from keeping your payroll team in-house?
- What does your cost-benefit analysis say? Should you keep all of your payroll activities in-house? Or should you outsource some or all of your payroll duties?
With the outsourced model, you entrust all or some of your payroll responsibilities to an external service provider. According to the Bloomberg Tax 2019 Payroll Benchmarks Survey Report, the most popular outsourced functions are:
- Tax filing
- Unemployment insurance administration
- Wage payment and gross-to-net
- Global payroll
- Benefits administration
- Workers’ compensation management
- Time and attendance
Notice that every one of those 7 functions is tied to payroll. The Bloomberg Tax report also states that smaller employers are more likely to outsource all or some of their payroll functions than larger employers.
Notably, most employers outsource only part of their payroll, and only a minimal percentage outsource their entire payroll. Often, businesses outsource the payroll areas that are most time consuming and/or complex, such as payroll taxes and wage calculations.
Payroll service providers usually have trained payroll experts on hand who can save you time and help you avoid costly errors. However, there are potential downsides to outsourcing, with some of the biggest pitfalls being selecting the wrong provider and you not having direct access to your own payroll team.
If you’re going to outsource, make sure you choose a vendor whose mission is to:
- Prevent payroll mistakes, or at the very least, keep them to a minimum
- Provide you with easy access to payroll information
- Deliver cost-effective payroll solutions, without sacrificing quality of service
If you do any payroll in-house, payroll software is a must
The value of payroll software is indisputable. For starters, it not only speeds up payroll processing but also reduces the likelihood of mistakes. Moreover, in these COVID-19 times, the need for electronic payments — such as direct deposit and pay cards — along with online pay stubs is at an all-time high. Payroll software makes these delivery channels possible.
But not all payroll software vendors are created equal. Therefore, it’s important to examine the abilities of your current payroll system and how much it’s costing you. Is there a better option out there? There might be.
Take Zenefits, for example
Recognizing that the coronavirus has plunged small businesses into uncharted territory, “Zenefits is offering free payroll for 12 months to all new small business customers with an annual subscription to any of their core HR software packages.”
Typically, employers pay for the payroll and HR applications separately, each on a per-employee basis. With the payroll software being free for 12 months, new small-business customers would only pay for the HR software during that period.
Also, at no extra cost, you get:
- Unlimited pay runs
- Multiple pay schedules
- Federal and state tax filings
This is a major incentive for small businesses seeking affordable payroll software that’s built to facilitate changes stemming from COVID-19.