Employees work for employers; employers then have to pay the employees. This transaction is fundamental for all businesses no matter the product, size, or sector. Payroll affects the morale of your business and reflects the financial stability of your company, by having on-time payroll you are guaranteeing to your employees that the business is stable and that you can be counted on.

We’ve talked about various ways that PEOs can help you with your business on this blog, and for this post, we thought about discussing how they can help you run your payroll and save you money and time in the long run. We’ll also be looking at the importance of having a professional payroll system for your business and how it helps your business.


The Importance of Payroll

We asked our team about why payroll is important for a business (besides the obvious reasons) and they gave us a good list of reasons that we want to share with you:

  • Morale– People are happy when they receive compensation for a job well done. So naturally, it makes sense that on-time payroll can keep employee morale up in uncertain times. Take the COVID-19 pandemic for example. There is a load of uncertainty for some businesses on whether they can even pay their employees, this uncertainty would make anyone question if they should continue to work for their employer.
  • Compensation– payroll allows an employee to see how their net worth fits into a small company. Salaried employees who see their entire compensation (benefits, bonuses, and salary) can see how they fit into the company when they get their annual performance review. A well-kept payroll can allow the employer to show a record of how they’re compensation has grown over time with the company giving your employees a sense of progress.
  • Reputation– Nobody wants to work for a business that can’t pay its employees. This is why there is stability when paying your employees on-time. Small businesses don’t have the name recognition that bigger brands do, so they need to go a little farther to build loyalty with employees.
  • Lowers Tax Bills– Payroll can commonly be one of the biggest expenses of a business, but when it’s done correctly it can save you money on taxes making the overall cost cheaper. By ensuring that employees fill out their W-4 withholdings correctly, correctly withholding the proper amount of FICA taxes each year, and ensuring that each employee is properly classified for any potential tax benefits.


How PEOs Can Help

Payroll administration can be a headache for small businesses. You need to navigate the taxes that you need to set aside for each employee, calculate how much each employee should be paid, manage the disbursement of funds, and a myriad of other administrative tasks. This can end up being costly, and if you’re overpaying for payroll it can end up sinking your business.

This is where PEOs can come in and help. Because PEOs already have comprehensive payroll systems set up for their existing clients, they can help you take the administrative work out of payroll. So instead of attempting to hire a small in house HR team or relying on automatic software, you can have a team of dedicated professionals to help you pay your employees.

PEOs are also better equipped to help navigate all the different state and local laws that come with payroll. Federal income tax, State income tax, FICA, Medicare, and unemployment are just some of the taxes that employers have to deal with when managing payroll, and if you end up underpaying on any of these it can come with some serious legal consequences.

PEO teams can also correctly classify your employees to ensure that each of them is being paid fairly under the Fair Labor Standards Act (FLSA). Some employees may even need special deductions applied to their payroll if they need garnishments taken out to pay debt, alimony, or other court-mandated garnishments.

Bad bookkeeping can have a direct impact on the cash your business has in the bank, and mistakes in payroll can keep your employees from being paid or worse. The extra mile that PEOs put in and the money they save you can be used to help your business grow.



Having trouble setting up a good payroll system for your business? SolveHR offers transactional HR services that handle the payroll and tax administration of your business! Let us take the headache out of paying your employees, so you can focus on what’s important—growing your business!

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Written by: Matthew Muriel

Meet Matthew! Matthew is our content writer and has been working with us for a year. He enjoys working for SolveHR because it allows him to practice his copywriting and allows him to build experience in his fledgling career. Matthew studied at the University of Texas at San Antonio and earned his degree in English with a concentration in Professional Writing. He values learning new processes in the HR industry and then conveying those ideas to the company’s clients. When he isn’t working, he enjoys reading nonfiction, with his favorite book that he recently read being The Gene by Siddhartha Mukherjee. If he could go anywhere in the world he would travel across the United States and visit all of the national parks.

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