Essential tips for outsourcing payroll and getting the most bang for your business’s buck

Outsourcing payroll is a smart decision for business owners looking to relieve themselves of the time and labor-intensive complexities of processing payroll. And the beginning of the year is an ideal time to make the change. In fact, more than half of small businesses decide to outsource their payroll each year starting in January when year-end calculations and reporting are complete, expediting an easy and smooth transition.

Smart Business spoke to Mark Strippy, Executive Director, Payroll Services, Heartland Payment Systems, for some tips to help you get started “shopping” for a processor.

1. Determine your business needs. Consult your payroll manager, human resources department, accounting personnel and IT staff to understand the functionalities all disciplines need.

2. Evaluate the features and benefits. Meet with several payroll service providers to determine how they work. Do not pick a processor based on price alone; instead be sure they can provide all the services your business needs. For example, your business might need help with 401(k) or worker’s compensation, so be sure the provider can handle those services as well as basic payroll.

3. Do your homework. Ask fellow business owners, chamber of commerce or trade association members if they use a payroll processor. Find out what services they receive and if their provider meets their needs. What are their frustrations?

4. Compare costs. Many processors nickel and dime their customers by charging for items such as additions or deletions of employees, while others offer fixed rates for the length of the contract without incremental fees.

5. Look for a payroll service provider that guarantees confidentiality and information security. There are a variety of payroll submission methods — such as by phone, fax, e-mail and over the Internet — and you should be comfortable with how sensitive payroll data is transmitted. Choose a payroll service provider that protects your employees’ data.

6. Check if the payroll service provider can assume tax filing responsibilities. A payroll service provider should prepare quarterly and annual employee tax filing and assume liability for accurate and timely submission.

7. Be sure the payroll products and services are user-friendly. In addition to making sure the program is easy to use, investigate what type of support is available — such as a help desk and professionals who can assist with program troubleshooting.

Payroll planning, tax reporting, year-end calculations and many other tasks associated with payroll can be complicated and time-consuming, especially for small businesses. Although outsourcing payroll takes the burden off the business owner, it is important to recognize that not all payroll processors are created equal. All businesses need to be diligent in selecting their processors to ensure they get the best payroll bang for their buck.


Heartland Payment Systems, Inc. (NYSE: HPY), the 5th largest payments processor in the United States, delivers credit/debit/prepaid card processing, payroll, check management and payments solutions to more than 250,000 business locations nationwide. Heartland is the founding supporter of The Merchant Bill of Rights, a public advocacy initiative that educates merchants about fair credit and debit card processing practices. The company is also a leader in the development of end-to-end encryption technology designed to protect cardholder data, rendering it useless to cybercriminals. For more information, please visit HeartlandPaymentSystems.com, MerchantBillOfRights.com, CostOfABurger.com and E3Secure.com.

How businesses can prevent payroll headaches by avoiding common mistakes

Smart Business spoke to Mark Strippy, Executive Director, Payroll Services, Heartland Payment Systems, about how businesses can avoid the expense and headaches of common payroll mistakes.

Payroll is likely one of the biggest expenses your business incurs — and one that can cause the most headaches. Whether you have one employee or hundreds, you have a legal obligation to pay your employees accurately and on time. While that’s intuitive, there are many other not-so-obvious legal payroll requirements that may not be.

These 10 tips will help you avoid some common payroll mistakes.

1. Note important payroll deadlines

Report and deposit your payroll taxes to federal, state and local agencies on time. Late deposits can result in penalties and interest charges.

2. Classify employees appropriately

Classify your employees into the appropriate categories such as temporary employees, consultants and other independent contractors to ensure payroll reporting for tax purposes is accurate.

3. Report and calculate overtime pay

Here’s where the proper classification of “exempt” and “non-exempt” employees is really important because it can be costly. According to the Department of Labor, litigation claiming non-exempt employees who were treated as “exempt” employees and, therefore, not entitled to overtime — but should have been — continues to increase.

4. Distribute 1099 forms on time

Give your independent contractors who earn more than $600/year a 1099 form by January 31 of the following year. This will help you meet your filing deadline and avoid late penalties — $15 for every 1099 form that is 30 days late, $30 for every form filed by August 1 and $50 for all 1099 forms filed after August 1.

5. Double-check data entries

Data entry mistakes — including incorrect hourly wages and the wrong number of employee hours per pay period — cost companies millions of dollars annually. In addition to potentially increasing expenses if workers are paid for hours they didn’t work or at a higher hourly rate than they should be, this can result in government penalties. Be sure to double-check your entries for accuracy.

6. Send court-ordered payments to the proper recipient

If you don’t follow court-ordered garnishments such as levies or child support, you may be prosecuted and could be fined up to $1,000 — or even imprisoned.

7. Don’t rely solely on your software program

Be sure to enter all of the necessary payroll data. Your payroll program is only as good as your input. It can’t perform accurate calculations without all of the necessary information.

8. Save payroll records

Keep time sheets, cancelled checks and W-4 forms — in a safe and accessible location — for four to six years. Failure to do so could lead to criminal penalties and/or civil actions.

The Wage and Hour Division of the Department of Labor must be able to inspect your records within 72 hours of notifying you.

9. Maintain payroll confidentiality
Keep your payroll information within the payroll department and the senior management team. Failure to do so could lead to criminal penalties and/or civil actions by disgruntled employees.

10. Train more than one employee in payroll functions

Have more than one employee trained to do payroll in case the employee who is primarily responsible is out of the office. The IRS, the state and employees need to receive payments on time. Also, have a manual backup system in case a computer fails.

Following these tips can help you foster and maintain employee satisfaction — as well as prevent headaches with federal, state and local agencies. You can also avoid payroll mistakes by outsourcing. If you’re considering outsourcing, turn to Heartland. We’ll take away your payroll processing worries so you can focus on operating, improving and growing your business.

Heartland Payment Systems, Inc. (NYSE: HPY), the 5th largest payments processor in the United States, delivers credit/debit/prepaid card processing, payroll, check management and payments solutions to more than 250,000 business locations nationwide. Heartland is the founding supporter of The Merchant Bill of Rights, a public advocacy initiative that educates merchants about fair credit and debit card processing practices. For more information, please visit HeartlandPaymentSystems.com, MerchantBillOfRights.com, CostOfABurger.com and E3Secure.com.

Increase in July payrolls may soothe recession fears

WASHINGTON ― U.S. job growth accelerated more than expected in July as private employers stepped up hiring, a development that could ease fears the economy was sliding into a fresh recession.

U.S. payrolls increased 117,000, the Labor Department said on Friday, above market expectations for an 85,000 gain. The unemployment rate dipped to 9.1 percent from 9.2 percent in June, but this was mostly the result of people leaving the labor force.

The payrolls count for May and June was revised to show 56,000 more jobs added than previously reported

The report was the first encouraging piece of economic data in some time.

Fears that U.S. economy might be sliding back into recession, coupled with Europe’s inability to tame its spreading debt crisis have roiled global financial markets. Economists see the odds of a recession as high as 40 percent.

U.S. stocks on Thursday suffered their worst sell-off in two years.

Top policymakers at the Federal Reserve will sift through the report when they meet on Tuesday but are not expected to announce any new measures to support the sputtering recovery.

The U.S. central bank has cut interest rates to zero and spent $2.3 trillion on bonds. Policymakers have said they want to see how the economy fares before taking any further action.