Improving Small-Business Payroll

By Lauren Simonds | Posted January 09, 2006

You won't find processing payroll at the top of any small business owner's list of favorite pastimes. Dealing with state and federal tax forms and deadlines, personal payroll deductions, direct deposit and a myriad of other considerations, employers experience payroll as a time-consuming, complex and often frustrating necessity.

PayCycle.com, an online payroll system with a reputation for making the process easier for companies with fewer than 20 employees, today announced two new features designed to simplify payroll even more. The enhancements, My Setup Wizard and a new Employee Web site called PaycheckRecords.com, are the result of a two-year study PayCycle undertook to better understand the needs of its customers.

According to Karen White, PayCycle's vice-president of product management, the changes are meant to make payroll an easier, guided process. "Through the global research firm TNS NFO, we sponsored an online study of 500 small business owners, and the results showed that only 35 percent of SMBs really understand how to handle payroll."

The study also showed that 75 percent of all small businesses in the US manage all or some of the payroll on their own. White added that this group in particular finds the idea of learning to use a payroll system daunting at best. "We wanted to make it easier and less intimidating for these small business owners to move from a paper-based system to electronic-based payroll," she said.

In addition to the study, PayCycle spent two years conducting on-site customer research to see how people used the program. "What we found," said White, "is that small business owners want a lot of hand holding throughout the process so that they don't miss any critical steps."

According to IRS statistics, it assessed more than $6.3 million in payroll tax penalties in 2004 at an average of $388 per incident. That dovetails with the TNS NFO finding that 66 percent of small business owners think tax penalties are expensive and important to avoid.

My Setup Wizard
PayCycle designed the new wizard to guide customers step-by-step through the entire payroll process — from when they first sign up to when they run their first payroll. Antonio Borjorquez, the financial coordinator and business manager at Murray Dental Care, a dental office with 10 employees based in Cupertino, Calif., says the new wizard is a welcome improvement. "And I liked the old version," he said.

In the old version, said Borjorquez, you had to pick your way through the five various categories and input hiring data — wages, deductions and taxes, etc. — and hope that you didn't forget anything. "Now, the wizard starts with the basic information and takes you from one category to the next. It guides you through a checklist that's much more user-friendly," he said.

Adding a new employee now takes Borjorquez less than seven minutes — an improvement from the 15 minutes under the previous version. "The program saves time and frees me up to do other things. I don't know about your job, but I have days where an extra 10 or 15 minutes is precious."

Employee Web Site
The new Employee Web site (which has been available to current customers for several weeks) lets employers e-mail employees to let them know that a new pay stub is ready. Employees can then log on to the secure Web site, called PaychecksRecords.com, and access that information.

The new site lets employees view, print or save the pay stubs as a pdf file. According to White, the site retains the pay stubs so they're available if employees need them for loans or other reasons. "This has been the most popular feature we've ever offered," said White. "Our customers have responded to it with almost stadium-like applause."

Joan Fuetsch, the owner of Principled Solutions, a financial planning firm out of Menlo Park, Calif., was one of PayCycle's first customers. A frequent business traveler, she likes that PayCycle is Web-based because it lets her process the payroll whether she's at home, in Guatemala or in the UK. She also relies on the service's e-mail reminders and tax form information.

"The reminders keep me on track with tax filings. PayCycle makes everything simple, especially dealing with the government and taxes, which can be burdensome."

The Employee Web site also keeps her more organized. "I was constantly printing out pay stubs and losing them before I even got to the office. The Web site helped me put a stop to that."

Antonio Borjorquez calls the new Web site a time saver. "Eight out of our 10 employees take advantage of this feature," he said. "That translates to 80 percent less time I spend printing, stuffing checks into envelopes and putting them in mailboxes. Plus, it's less paper and printer toner, too. Over all, I save about 30 minutes every two weeks."

Rich Friedman, a senior project manager at TransourceBPO Solutions in Deerfield Beach, Fla., hasn't tried the new Employee Web site yet, but he's pleased with how quickly PayCycle let him process the company's year-end W2 forms. "We've got 18 employees, and it took me longer to stuff the envelopes."

Lauren Simonds is the managing editor of SmallBusinessComputing.com

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