David Geller: Just Pay

MANY JEWELERS THINK that any job they can do themselves saves them money versus hiring that job out.[/dropcap]

Well, I’d like those jewelers to think about their attitudes, especially when it comes to payroll. There are several ways you can go about paying your employees (and calculating those dreaded W-2’s come January). I’ll go through the options quickly, and let you make a decision as to what provides the best return on your time, the greatest level of accuracy, the most useful records, and the least danger for your business. In short, which provides the best overall value for you. Here goes:

Option #1:Manually figure payroll from the booklet the government sends you.

Analysis: Too time-consuming. Expect to spend at least twice as much time figuring payroll as you would with a $300 off-the-shelf software program. Figuring taxes, deduction and hand-writing checks is laborious. Plus, if you make a mistake there can be serious penalties. Then you have to type up your own W-2’s in January. Doing payroll this way is so 1980’s!

Option #2:Use a program built into your accounting system, i.e. QuickBooks or Peachtree.

Analysis: Both of these programs can calculate payroll monies. Simply click on “Pay Employees” type in the number of total hours worked into each employee’s line. The program distinguishes between regular hours and overtime, will make deductions and give a monthly report of how much to pay to each branch of the government to whom you owe money. It will even print the forms for you. If you have deductions for insurance, you’ll have to figure when to pay those on your own, but the program will deduct it for you. QuickBooks offer three types of payroll — standard, enhanced, and assisted — which offer various levels of information support. These services start at $17, $25, and $59 a month respectively, and increase depending upon the number of employees in your company.

Option #3:Have your CPA or accounting firm calculate payroll after you supply them with a list of the work hours of your employees.

Analysis: Many folks just call or fax their accountant and let them do all of the work. Fine. Sometimes this can be expensive and sometimes it’s a bargain. I know one small store whose accountant does all payroll as well as monthly financial statements for a mere $200. But if you use this option, you still have to enter the checks manually into your checkbook.

Option #4:Using an outside payroll service like ADP or PayChex.

Analysis: This is the way I would suggest for many companies — be sure to let the service print the checks on their bank account (which they’ll then FedEx to you). After that, they debit your checking account for all monies including all taxes and send the taxes each week along their way. They send in your 941’s (you never sign another form … ever!) and, in January, deliver your W-2’s. All you have to do is enter the checks into QuickBooks or your checkbooks.

Better yet, by letting them print the checks on their account, you won’t have to enter every check. These companies will give you a record binder that includes the entire history of each employee and check. If you use one of these services, I’d suggest entering one check into your check book for the whole week’s payroll and divide it by department.

Another advantage of using one of these payroll services is that it allows you to more easily offer benefit packages. Even a one-person corporation can have a 401K plan and sock away over $30,000 a year and these companies have funds to put your money into. In addition, they have “cafeteria plans” where you can put away tax free dollars for childcare, eyeglasses and other things not covered by insurance. I’m told that ADP and PayChex even offer insurance through another section of their company.

You can enter payroll by phone, fax, or over the Internet. Employees can even manage their own benefit packages over the Internet.

Option #5:Using a Payroll Leasing Service — i.e. Administaff

Analysis: Also called “employee leasing”, this is what I used in my store. Think of it as PayChex or ADP … on steroids. Basically, what such services do is turn all of your employees into “temp employees.” Your entire staff is on their company payroll, and their company hires you, the owner, for $1 a year to manage them. After you submit payroll details, their company will pay employees on their checking account. Again, this means it’s easy to use. But also, because everyone on your staff technically works for the leasing company, you can also benefit from great deals on health insurance — since your employees are all now part of a 1,000-strong workforce.

In my situation, when I moved my company over to an employee-leasing system, we saved more than $1,000 a month on our health insurance premiums! Yes, we had to pay for the service — but the net result was a savings. (And that’s not to mention the time-savings and worries about tax liability being taken off our shoulders. They can even help you with Human Resource materials and handbooks.)

The leader in this field is Administaff, but there are others. Costs vary on all of these, and some services require at least five employees. In my current business, as a consulting company with just two employees, I use PayChex and have a 401K plan and bought my insurance separately through Blue Cross/ Blue Shield.

By now, it should be clear that payroll is one area where you should definitely avoid the temptation to do it yourself. I guarantee you’ll make no money doing your own payroll. Outsource it, all of it, so you can concentrate on selling and marketing.

Start the new year off right and get rid of the drudgery and concentrate on growing your business.

This story is from the February 2006 edition of INSTORE.