Payroll services handle employee payments, taxes, and other fees for a fee, freeing up business owners’ time. ADP is a leader in the industry, offering computerized accounting and other services. However, it’s important to research and choose a reputable company to avoid fraud and liability.
Typically, employees are paid a fixed rate, on an hourly or wage basis. In the United States, employers are required to pay Social Security, Medicare, Workers’ Compensation, State, Federal, and often local taxes for each employee. An employer must also deduct a portion of these taxes and other fees from employees’ paychecks, and all such transactions must be recorded for auditing and tax purposes.
A payroll service is a company that will, for a fee, handle all of these functions independently, freeing up the business owner’s time for more important matters. Once an account is established, the employer simply provides the service with a list of all employees, hours worked and any changes. This data is then processed and the funds are transferred from the employer’s bank to the payroll service account. Employees are paid by standard check or direct deposit. The employer is then provided with pay stubs and tax reports.
A payroll service often offers other services as well. Employers can rely on the management of social security and pension services. You can also keep track of holidays and free time. Some services also offer the ability to manage employer tax payments, manage time and work management issues, provide assistance with tax compliance, manage expenses, and even pre-screening assistance. The service also regularly manages the paperwork necessary for the direct deposit of employee pay slips. Service fees vary depending on account size and the types of services rendered. Typically, there is a charge per person, plus a charge per cashed check.
The first payroll services company was founded in 1949 by former New Jersey Senator Frank Lautenberg and brothers Henry and Joseph Traub. Initially called Automatic Payrolls, the company offered simple services using an electromechanical calculator and Comptometer accounting. Automatic payroll, which was later renamed Automatic Data Processing (ADP), kept up with the technology. ADP has pioneered the use of computerized accounting, starting with punch cards and ending with the most sophisticated technology in the industry.
ADP grew by acquiring smaller payroll companies and finally went public in 1961. The firm continued to grow and is recognized as a leader in the payroll services industry with over 500,000 clients and a staff of over 40,000. Today ADP manages not only payroll but also manages a variety of brokerage and dealer services.
ADP’s success has served as a business model for payroll services, and this concept continues to evolve with technological improvements. Today many services interface with their customers directly through the Internet. A customer can simply enter payroll data into their web portal and the transaction is processed immediately. The client has access to all payroll and personnel records and this information can be updated as needed. Reports can be accessed quickly, streamlining payroll tasks and eliminating costly errors.
The proliferation of payroll computer service has led to some cases of fraud and outright theft of funds. Therefore, it is vital that you do some research to ensure that any particular company is reputable and trustworthy. After all, this company will have access to a company’s most confidential documents, including its bank account. Additionally, if a service fails to make its tax payments on time, the company will be held liable and fined accordingly. Since these cases are generally rare, the benefits of using a payroll service outweigh any risks.
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