Peter Limone, CPA, CGMA – President and CFO



Payrolling companies serve as the employer of record for your contingent workforce. This can include temporary help, project workers, seasonal help, interns, or independent contractors.  As the employer of record, the payrolling company is responsible for payroll, payroll taxes, benefits, and HR management. Since they are the employer of record, all tax filings are done using the payrolling company’s federal tax identification number.

There are numerous reasons why a company may want to use payrolling as a strategy to manage their contingent workforce. Here are some of the most frequent reasons:

Planning to expand your business out of state. A typical expansion might include finding a location, applying for business licenses, recruiting employees and managing renovations.  If this is your plan, your timeline can be six months or more before your business gets up and running in your target state. If the opportunity that lead you to the expansion is a short term opportunity, you may miss a portion of the benefits that come with expanding your business. An alternative is to use a payrolling company to expand into your target state.  Your new plan might look like; hire sales employees and use the payrolling company to payroll and manage benefits for them.  They can now get started on selling before your new location, permits, licenses, and renovations are complete.  By the time you’re ready to open your doors, you’ll have a sizeable pipeline of business.  When ready, you can move the sales employees or any other employees you payrolled to your own company’s payroll.  There are typically no conversion fees with payrolling firms.

You’re a foreign company who wants to start a business in the USA. Let’s face it, employment and payroll laws in the United States are very complex.  There are states such as California and New York that lead other states in terms of employment law which adds to the complexity. If you’re expanding your business to the United States, it makes sense to use a payrolling service.  You won’t need to learn all about how payroll is processed, how taxes are paid, and what benefits are mandatory or voluntary. When your business is up to speed and ready you can transfer the employees onto your own payroll from the payrolling company. This arrangement can be in place for just a few months to more than a year which is ample time to get your business up and running within the United States.

Want to start your own recruiting business. Let’s say you have been in the recruiting business for a while working for a staffing firm and have been thinking about breaking out on your own. Your challenge may be with procuring the infrastructure needed to run a recruiting business with contract placements. You will need funds to pay the employees, a system to pay the employees and track all their deductions, a process to pay Federal, State, and local taxes, SUTA, FUTA, a worker’s compensation program and policy, and have secured insurance for general liability, employment liabilities, travel, and any other business insurance appropriate for your business.  In addition you’ll need to set up a system to bill and collect from your clients, not to mention you’ll need an accounting system to know if your business is profitable. The alternative is to use a payrolling company to handle the back office services you need.  All of the above services are provided in addition to benefits administration and accounting for your business’s gross profit.

Have a need to on-board seasonal employees quickly but don’t have the capacity. Let’s say your company has a need to on board several employees each year to handle your busy season or projects. Your HR department must be able to ramp up on boarding in order for your business to manage through your busy season and take advantage of the opportunities it provides.  By using a payrolling company for your seasonal employees, your HR department could use them instead of ramping up beyond current capacity. Payrolling companies are adept at on boarding quickly, giving you the freedom to concentrate on your business rather than suffering delays due to paperwork processing.

These are just some of the benefits you can take advantage of by using a payrolling company.  I’m often surprised by the many reasons our clients come up with to use our services.

An experienced employer of record can help you avoid expensive issues that may arise with your contract or contingent workers. Reach out to the friendly experts at Innovative Employee Solutions for further assistance today! – See more at: Innovative Employee Solutions.

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