Every owner has at one time or another replaced or hired new employees to handle various responsibilities throughout their sites. Once they have staff in place, the next decision is whether to tackle the payroll in-house, use a payroll service or place the employees in the care of a leasing company. Each of these alternatives has advantages and disadvantages.
In-House
If you own other businesses, you likely have office staff and personnel who already handle your accounting, including paying bills, doing the payroll, filing employee taxes, and paying workers' compensation and disability/general-liability insurance. Adding a few more employees to the payroll will probably not be a big burden on the current office staff. They are already being paid an hourly wage or salary, so the advantage is you don't incur any additional costs. However, it may be the office staff are lax in paying those taxes, lack time to shop disability-insurance rates or aren't payroll specialists. They may not be up to par on changes in the employment laws and tax rates. You may need to hire someone just for payroll if you operate numerous sites. This could be the most cost-effective option.
Payroll Service
There are many national payroll companies. They can help you set up an account and make it easy for you to process your payroll. They will provide worksheets and timecards, file all employee taxes, process W2s or 1099s, and give you updated reports on your payroll charges, checks sent, etc. This is probably the best scenario for the small- to mid-sized owner.
The cost of this service is usually at a fixed rate of, say, $25 for the first check, then $2 for each check thereafter. Filing tax forms may incur an extra fee. You can find these services in the Yellow Pages under "Payroll Service." This sort of arrangement affords you the most control and flexibility in regard to your payroll.
The one disadvantage is payroll companies will only process what they are told. They will not tell you if you are in violation of not paying overtime correctly or guide and direct you in employment issues.
Employee-Leasing Companies
There are several national employee-leasing companies with which an owner can place his staff. In essence, the staff member becomes the employee of the leasing company, not the facility. Some will offer discounts on air travel, movie tickets, etc., for becoming one of their employees. They provide all the employee handbooks, supervisor manuals, warning letters and other documentation necessary to manage people. Because these companies are usually rather large, they can offer a discount on workers' compensation and disability insurance. They usually charge a percentage of your total payroll as a fee to process it.
The disadvantage to this arrangement is the employee "belongs" to the leasing company, not you. If you have a problem employee--one who disrupts business with a negative attitude or poor work habits--you must be prepared to work under the leasing company's regulations, rules and guidelines for dealing with him. It is not easy to replace a bad employee when he is leased.
I had some horrible experiences with a large leasing company where we were forced to keep employees while watching the office morale erode. In some cases, we lost good employees because of one bad one. In my opinion, the savings on workers' compensation and disability insurance is not worth revenue lost in employee turnover. Leasing companies like to make you think you must continue to use their employees or bear the risk of a wrongful-termination suit. You need not be intimidated. If you have the proper documentation in dealing with your employees, e.g., verbal and written warnings, recommendations for correcting behavior, etc., you shouldn't have reason to worry.
No matter which payroll option you choose, you should determine which will afford you the most control. Doing your payroll in-house probably demands the most attention and time. Using a payroll service affords you more flexibility in hiring and replacing staff; and it's easy to replace a payroll service if you don't get the service you require. Having your hands tied by a leasing company can cost you much more than any annual savings. Ask yourself how much a bad employee can cost you.
Pamela Alton is the owner of Mini-Management®, a nationwide manager-placement service. Mini-Management also offers full-service and "operations-only" facility management, training manuals, inspections and audits, feasibility studies, consulting and training seminars. For more information, call 800.646.4648.