Processing employee paychecks can be a time consuming and tedious task. Computations can be a maze of paperwork, transfers of funds to different bank accounts, employee savings accounts, and different government agencies. All businesses are required by law to pay certain employee taxes, and to provide end-of-year wage reports (for example, W-2 forms). These tax amounts can change when employee gets married, has a child, or elects to change exemption status for any reason, and the implementation of new regulations (for example, the increase in the federal minimum wage) usually requires immediate compliance. Filing late or error-filled documents results in expensive penalties and fees.
Why HR Outsourcing Can Be Good for Your Business
Instead of hiring a full-time, full-salaried HR individual, you can hire an HR company on a per project basis. That way, you only have HR when you need HR. They are well versed with current federal regulations, helping you stay compliant. Many HR companies offer payroll services in addition to the general administrative work normally associated with them. HR services can help you find better employees; they often have the resources, and time, to find talented job candidates with the skill sets you are looking for.
401Ks are retirement plans provided by employers that allow their employees to deduct a portion of their monthly paycheck to be put into tax-deferred account, which is selected by the employer. Restrictions are set about how and when an employee can withdraw money from their 401K, and penalties may occur if assets are prematurely drawn out of the account.
PEO and EMPLOYEE LEASING
A professional employer organization (PEO) or employee leasing involves the outsourcing of employee benefits administration, payroll, workers’ compensation, and human resources. A PEO will hire a company’s employees and then lease them back to their original employer under a contract for a management fee. This company is considered the PEO’s client.
Employee leasing is done for tax and insurance purposes, because such paperwork is filed under their tax identification number instead of their client company’s. Even though employees are being leased out, their original employer is still in charge of their daily activities.
Whether you are a post start-up company, or just getting started, chances are you’ll need to hire employees to grow your business. If your business is or operates with schools, hospitals, financial institutions, airports, or the government, a background check is required by federal or state law. Background checks look up and compile any criminal, commercial and financial records of an individual. Oftentimes they are helpful to evaluate a job candidate’s qualifications and to identify potential hiring risks.
If an employee is injured or disabled on the job, their employer is required, by law, to financially compensate them. Such payments to the employee are specifically exempt from taxation. All companies must have this type of business insurance, which provides medical coverage and income replacement. Workers’ compensation also helps prevents employers from being sued for the specific condition of the workplace that caused the injury or illness.