2011 Review of Professional Payroll System
From the September 2011 Issue
Payroll is an important part of any business, and most payroll solutions currently available are capable of providing support for all business types and sizes. Although technology and automation have made compliance much easier, payroll continues to grow in complexity. As with most tax compliance rules and regulations, the reporting and tax compliance issues for payroll are constantly changing. Keeping up with these changes is difficult for any accounting professional, much less the average small business owner. Add to this the increasing demand for human resource (HR) management functions and the situation gets even more complicated.
Due to the changing nature of payroll, accounting professionals are constantly sought after for guidance with payroll-related issues. While most accounting professionals have a knowledgebase capable of handling all aspects of payroll, many may not have the requisite time or dedicated staff resources to perform the work. In addition to time and staffing issues, accounting professionals also have different views on the proper model to use for processing payroll. Some prefer to perform all or most of the payroll functions themselves, while others prefer to maintain a management role and review payroll periodically.
With recent improvements in web-based technologies, many payroll vendors are offering multiple online services. These offerings are typically pay-per-use and offer varying levels of client, accountant and vendor responsibilities. Traditional on-premise software is also available for clients and accounting professionals to manage payroll. On-premise solutions may require more upfront investment, but may ultimately be more cost effective. Regardless of the vendor solution, today’s payroll software offers a significant amount of automation to reduce the error rate and time spent in processing payroll. Many of today’s payroll systems are also incorporating HR management functions that were historically only available to large enterprises.
In last year’s payroll system reviews, we introduced four general models of payroll systems. These models span from client in-house solutions to payroll vendor outsourced solutions that have minimal client input requirements and accounting professional involvement. For this year’s payroll system review, we have retained these models to easily identify the level of service to be performed.
The payroll solutions reviewed here may help accounting professionals direct a mundane activity into a profitable service offering. By turning low-cost services into high-gross margin work, accountants may also create a new revenue stream. Accountants offering payroll services are also in a position to gain additional work through frequently interacting with their current clients’ most valuable assets, their employees.
Payroll System Models
Full-Service Payroll Systems are thought of as traditional service offerings and are controlled wholly by the accounting professional. Clients provide employee hours and other information, and the accountant processes all payroll checks and required reports.
Partially Assisted Payroll Systems are designed to offload the compliance processing to a payroll vendor. Employee hours and other information are provided by the client, but the accountant processes or reviews this information before each payroll run. Many solutions in this category are web-based, pay-per-use services that require little operating costs for the accounting professional.
Direct Client/Business Use Payroll Systems provide employers the capability to manage their own payroll processing in-house while the accounting professional has the ability to view reports and pull financial data into a general ledger as needed. In this setup, the accounting professional provides oversight only as necessary.
Outsourced/Referral Payroll Systems & Programs are generally web-based solutions that blend client, accountant and payroll vendor collaboration. Clients will provide all employee data, while accountants will run the required financial and general ledger import reports. All back-end compliance is handled by the payroll vendor.
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