Folks:
The last time that I had full-time W2 employees in Massachusetts I remember it as a paperwork nightmare, despite the fact that I used ADP (I think) to create the checks. I think we had to send checks periodically to five different government agencies (one for federal tax withholding, one for state income tax, one for unemployment insurance, one for worker’s comp(?), and one that I can’t remember anymore).
I’m current planning to hire a full-time photographer/videographer and a full-time journalist. What’s a good service that I could use to pay these folks on a standard W2 basis without it becoming a burden? And what are the laws and regulations regarding health insurance? With Obamacare in place I can simply tell them to sign up with a state-mandated insurance program of some sort? Any other big changes since the 1990s when I was last enmeshed in this forest of bureaucracy?
[This dovetails a little bit with my March 2011 posting about Web-based accounting systems. I never acted on putting in a real accounting system so maybe I could combine that with the W2 service.]
Thanks in advance!
Many, many other changes. You will be crippled by the bureaucracy and the cost, basically.
You’d definitely be better off using contractors. So, most likely, would they.
lelnet: More specifics would be helpful. But if these folks are working for me full time, isn’t it tough to explain why they are 1099 contractors?
We usually use QuickBooks, which can handle all this, but I wouldn’t venture to say that it is easy or the best. Just one, common, successful option.
Obamacare last I checked only forces employer based insurance on companies of size 50 or larger, so you should be fine.
Thanks, Timothy. I think Obamacare makes my life as a small employer better because I don’t have to arrange for some sort of group health policy. Whereas in the old days it would have been hard for an individual to buy health insurance at a reasonable rate, now the government forces the insurance companies to deal with small customers that they previously wouldn’t have wanted to talk to. (Not a great example of the free market, obviously!)
I run two small companies in Arlington MA and I use a local firm, TimePays. Have used them for 8+ years now, and they’re quite good. I send an email once per pay cycle listing the hours of my hourly people, and just confirming that the salaried ones are still on staff, and they take care of the rest, including all quarterly and annual payments and filings.
philg, I think adp should be at the bottom of your list.
Zenpayroll is the buzz-du-jour in that space right now: http://goo.gl/lvPyo
Today there are a ton of providers out there in addition to zenpayroll. Perhaps try HN?
I’ve heard great things about Tri-Net. Their website looks insane in terms of information overload but I know people who swear by them for outsourced payroll/tax compliance/etc.
http://www.trinet.com/solutions/core_services/payroll_tax_administration.htm
I think given your location surrounded by educational institutions these should be internships instead.
There are pretty specific rules on the 1099 nonsense. I bet you can get around them. When I worked for a law firm back in 1992 it was trivial to get around. You can’t tell the contractor WHEN to show up. You can, most certainly, specify times that you are there and can most easily allow them access to your workplace. One of the more important things is to not replace them when you stop using their services. If you do, that seems like an employee.
There’s probably someone on the ‘net that has figured out the answer to each requirement, but it can’t be hard.
Rather than contracting directly with individuals, what about a staffing company? That’s how I’m paid–Hiring and firing decisions, scheduling and day to day direction are handled by the manager at my workplace, but anything related to pay is handled by the contracting company that I officially work for. Our section is about 80% contractors.
We use QuickBooks Accountant 2013, but it can be a bit much (Make sure you have a QB pro consultant person available to help with the bookkeeping and QB set up – really). Get someone (CPA or excellent bookkeeper) to help you set up an appropriate chart of accounts (not too big, not too small, but just right).
I am always stunned when I meet a small business owner who does their own payroll. It is worth every penny to have a company (we like and us SurePayroll) handle payroll and ALL state and federal filings (do NOT use Intuit for payroll – atrocious). (You also use an outside service so you are not tempted to use your unpaid taxes as a line of credit.)
We are under 10 employees and do not offer health insurance but we do offer a matching retirement contribution up to 3% via IRA through Vanguard. Health insurance is VERY expensive when you are a small group – cheaper and easier to let individuals get their own. Also, we found that it was a lot easier and no more expensive to get health insurance using a good insurance agent/broker.
We just stopped using PTO and let staff take whatever time off they need for any reason – face time is not important. If you hire and keep adults as colleagues they do not need to be monitored.
Remember that it is the TOTAL compensation package that is important to good people, and compensation includes all kinds of intangibles (e.g., they can bring their dog to the office), not just salary. Treating people like adults is worth a lot.
PS. Thanks for the many great free services you offered years ago.
Long time fan.
I use Intuit Online Payroll, which integrates nicely with QuickBooks. It takes care of calculating taxes, submitting tax payments electronically, and direct deposit is included in the price. Plus, if you’re a Costco member, you get a substantial discount on the monthly price.
Paying your employees is easy. In a nutshell, just ensure you have the necessary funds in your bank account, and then log into IOP just before every pay period and approve payment.
Paying taxes is easy, too. IOP will remind you when payments are due. Then, you just log in, approve the payment, and they will send the payment electronically on your behalf.
I have a company with two employees (besides myself and my wife) and use Quickbooks Online with their direct deposit payroll option and I am very happy with it. It’s $60/month well spent. It walks you through initial employee setup and all state and federal reporting, then paydays are a simple review and approve, and all tax payments and forms are automatically calculated and electronically submitted. Surprisingly good, actually.
Best of luck with the new venture.
I’m using Bank of america payroll service for the last six years. $21 per month if you use direct deposit. It’s not bad. They will fill out all forms for you and file electronically and generate a quickbooks files for your accounting software. I think the service is actually rebranded from Intuit
Phil,
I do not agree with posters urging you to call your hires “contractors”. The IRS is as clear as a bell as to what does and does not constitute a contractor compared to an employee.
For only two employees, I’d simply find a decent CPA to do the check-writing and make sure your quarterlys are filed properly. (I actually do this and it works swell)
It shouldn’t cost you much versus the time you’ll spend doing all the paperwork yourself. Your time is too valuable to write checks and file docs with the various taxing bodies.
Bring them on through a PEO–Professional Employer Organization. The folks are technically the employees of the PEO and get whatever benefits the PEO offers up. The PEO handles everything, including 401(k), medical, reimbursement accounts, etc., for a fee. Don’t use ADP’s–they are less than forthright.
Having used Quickbooks to run a 50 person company’s payroll, I can’t imagine going through all that hassle for only 2.
We use paycycle for our nanny. It’s easy peasy.
The IRS has various factors it uses to determine whether someone is an employee or an independent contractor. These factors center around how much control you have over them. But the IRS is irrelevant if you’re based in Massachusetts. Massachusetts has much much stricter criteria and it’s clear that these individuals are employees under the Massachusetts standards.
As for payroll services, I am surprised that previously you had this service send you checks to then send to various government agencies. It seems to me the payroll service should file electronically on your behalf.
As for the services, ADP has a good reputation but they are very expensive unless you have a lot of employees. I use Paychex.
I’m in Texas, where life is much simpler, but pretty much any good accounting or bookkeeping service can do the payroll processing job. I like dealing local, so I don’t know about the various on-line services.
If you want to set the hours and directly control these employees, then please don’t screw around trying to make them fake ‘contractors’. All it takes is for one disgruntled employee to send in an SS-8 to cause you a world of headaches.
And the Texas Workforce Commission gets really cranky if they think a small business is trying to dodge paying unemployment insurance by using ‘contractors’. I can only imagine (and shutter) to think what dealing with Blue State bureaucracy might be like.
The crumb I can contribute is this: Make the actual payroll deposits yourself, directly to the treasury department. Do NOT pay your payroll taxes to the service and trust them to pass it on to the government.
The IRS becomes maniacal about missed payroll deposits, as well they should.
It’s a common and sad story that small business owners get in trouble because their payroll service (even services with impressive 2 or 3 letters behind their names) just couldn’t resist the temptation to siphon off some of the payroll withholding money stream.
Use a service that does all the paperwork and gives you the deposit slip for you to take to your bank to deposit directly to Uncle Sam.
Phil:
Up here in Canada we have a great online accounting startup that recently introduced SMB payroll for Canada and the US. They’re called Wave. Check ’em out. https://www.waveapps.com/payroll/
Might be worth checking them out for your online accounting stuff, too.
Payroll has a modest fee but the online accounting stuff is free.
DAVE
We use http://www.surepayroll.com/ for our two-employee company. Never had a problem.
Hey Philip-
I use surepayroll.com as well and it has worked just fine for my company. I have both salaried and hourly employees. I submit hours every two weeks and can do it from my phone. You can pay less if you pay employees monthly. You do have to remember to send surepayroll your DUI experience rating letter from the state annually or risk a nasty bill with penalties and interest from MA.
-B