What is Payroll Service?

Generally, employees are paid at a set rate, either on an hourly or salary basis.Employers are obligated to pay Social Security, Medicare, workman’s compensation, state, federal, and often local taxes for each employee. An employer also must deduct a portion of these taxes and other fees from the employees’ paycheck, and all of these 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 payroll service with a list of all employees, the hours they worked, and any variances. This data is then processed and the funds are transferred from the employer's bank to the payroll service's account. Employees are paid either by standard check or direct deposit. The employer is then provided with payroll and tax reports.A payroll service often offers other services as well. Employers can turn over the management of the company’s benefit administration and retirement services. Vacation and time off can also be tracked. Some payroll services even offer the option of managing the employer’s tax payments, handling time and labor management issues, assisting with tax compliance, managing expenses, and even pre-screening assistance. A payroll service also routinely handles the necessary paperwork for direct deposit of employees’ paychecks. Fees for payroll services vary depending on the size of the account and the types of services rendered. Normally, there is a charge per person, plus a charge per check issued.The proliferation of the computerized payroll service has led to some instances of fraud and outright theft of funds. Therefore, it is critical to do some research to ensure that a given payroll service company is reputable and reliable. This company, after all, will have access to a company's most confidential records, including its bank account. In addition, if a payroll service fails to make tax payments on schedule, the company will be held accountable and fined accordingly. Because these cases are generally rare, the benefits of using a payroll service outweigh any of the risks.