What-is-Payrolling

What is Payrolling?

We all experience the question, “what does your company do?”  Most of us have an answer for this, but know that the answer we’re giving is not the full story.  Go ahead, explain your company in the next 20 seconds!  Of course there are companies out there where the product they produce is easier to explain – this is especially true when your company is focused and concentrates on just one or two products.

If you’re like me and your company provides an unusual or rarely understood product or service (in my case, payrolling and HR administration), depending on the situation you have a different answer. For example, to my 60 year old mother I might say “we process payroll.” Meanwhile, in a networking situation where I feel the need to be more descriptive, I might say “We serve as the employer of record for our client’s contingent workforce.” The latter explanation sounds fancier, but I’m never quite sure if it really means anything to the listener.

Let me break down the elements of payrolling; the payrolling company serves as the employer of record.  For the most part that means that employee and employer liabilities attach to the payrolling company, not the client.  The payrolling company is responsible for collecting and remitting payroll taxes and for paying all the employer taxes, Workers’ Compensation and any local payroll taxes. As the employer of record, based on contract and deal, the payrolling company also provides benefits to its employees such as Health Insurance, Dental Insurance, Flexible Spending Accounts and other benefits. The payrolling company also provides general liability insurances. Payrolling is for the contingent workforce, which means you payroll temporary employees, seasonal employees, and project-based employees, but generally not your permanent workforce.

As I wrote the above paragraph, a little voice inside me kept reminding me of another complicating issue involved in payrolling: that each state has different employment rules and those rules keep changing. That is very true, and the payrolling company needs to have a solid process for keeping up with those rules, whether they deal with co-employment, sick time pay, overtime rules, etc.

So when would it even make sense to use a payrolling provider? Below are a few examples:

  • You’re opening a branch in a country or city where you’re not licensed to do business. Using an employer of record, you can hire and payroll the individuals working in this new area indefinitely, or just for a few months until you establish yourself in that state. Benefit: you do not have to wait for all the accounts and permits required to do business in that state.
  • You have a six month project where you need to hire several employees to complete it, who will roll off as soon as the project is over. Benefit: your company does not suffer an increase in costs due to laying off the individuals at the end of the project.
  • You’re a recruiter or a staffing company and you do not want to process and fund payroll for contingent hires. Benefit: eliminate the headaches of processing and funding payroll.
  • You’re an entrepreneur who needs to hire additional staff, but you don’t have the time or expertise to deal with hiring and payroll. Benefit: ready- made payroll and benefits services so you can focus on growing your business. I could go on forever in networking situations explaining what payrolling companies do. Many times I’m asked whether we recruit or provide staffing services; the answer is yes, and sometimes I even use our tagline to address this: “you can find the talent, and also do the rest.” On occasion the question comes up “are you a PEO (Professional Employer Organization)?” Again, the answer is yes too. In general, PEOs hire permanent employees for the client, whereas payrolling companies hire temporary or contingent employees.
  • There are many benefits to using payrolling companies, however it’s not for everyone and it may not fit your situation.  If payrolling is the right solution for you, finding the right provider can lead to a productive, beneficial partnership that will last a very long time, adding value to your business while saving you time and costs.

Payrolling companies typically do not recruit and place workers, this is done by the client or by an independent recruiting or staffing company, which has the added advantage of letting you hire exactly who you like but still outsourcing the administrative functions of hiring and employment. Here, in Farazandishan, our services are unlimited: Consultancy, Recruiting, Payrolling, Financial Services, Training and Coaching.

I could go on forever in networking situations explaining what is your company doing. Many times I’m asked whether we recruit or provide staffing services; the answer is yes, and sometimes I even use our tagline to address this: “we can find the talent, and also do the rest.” On occasion the question comes up “are you a PEO (Professional Employer Organization)?” Again, the answer is yes too. (In general, PEOs hire permanent employees for the client, whereas payrolling companies hire temporary or contingent employees).

However, in case of only payrolling, there are many benefits to using payrolling companies, however it’s not for everyone and it may not fit your situation.  If payrolling is the right solution for you, finding the right provider can lead to a productive, beneficial partnership that will last a very long time, adding value to your business while saving you time and costs.

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