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3 Ways a Payroll Service Helps Keep Your Paychecks Accurate and Save Your Business Money


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Accurately paying your workers is one of the most critical functions of your business. Failing to do so can lead to significant problems with your employees as well as state and federal entities. Read on to discover how using a payroll service can help you pay workers correctly and on time.

1. Payroll Services Help You Properly Classify Workers

The people who work for your company fall into different classifications:

Depending on your industry, peak seasons and economic fluctuations, your business may have one, a few or several categories of workers.

The workers on your regular payroll are either exempt or nonexempt employees. (Employees do not include contingent workers such as independent contractors.) Exempt employees must meet specific criteria, including minimum salary level, salary basis, and particular job responsibilities. Nonexempt employees are entitled to a minimum wage and overtime pay after working 40 hours in a work week.

It’s critical to know how to classify workers to avoid violating the law. Classifications have different requirements for tax withholding and benefits entitlement. You must stay current on federal and state worker classifications. Payroll companies can keep you in compliance with wage, tax, and benefit regulations by accurately classifying your workers.

2. Payroll Services Run Reports Before Payroll

A payroll service can provide several reports that are helpful or, in some cases, vital to review before starting payroll. A deductions summary, for example, includes a list of deductions for each employee so that you can double-check amounts. A cash requirement report shows how much money you need to run payroll and breaks down the amount into categories such as deductions, taxes, and wages.

Another report called a payroll register summarizes worker information for the current pay period, including personal information, gross pay and hours worked. A quarterly or annual register lets you verify tax deposits and forms.

There are other reports to review before running payroll, and a professional service can provide them to help you reconcile your paycheck accounts and go over employee information.

If you already have accounting services in place, payroll software can work in conjunction with your existing system to help you stay on top of payroll. Look for software with time-saving features such as auto payroll and automated taxes and forms. You can set up auto payroll one time, freeing you to spend more hours on other aspects of your business instead of committing to completing payroll each week.

3. Payroll Services Help You Process Garnishments

If a court or agency notifies you of the need to garnish an employee’s wages, you may not be familiar with the rules associated with wage garnishment. However, failure to comply can result in penalties and fines. Wage garnishment is a legal procedure in which the employer withholds part of an employee’s earnings for debt payment. These can include:

  • Child support
  • Alimony
  • Unpaid taxes
  • Student loan default

Wage garnishment laws vary. Some states, for example, prohibit garnishment for consumer debt. Also, the maximum amount varies according to garnishment type. Payroll services can keep you in compliance and help you garnish the correct percentage of a paycheck.

Using a payroll service to provide workers with an accurate paycheck helps your business comply with applicable laws. It also means you are a dependable source of income for your workers.

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