And how to utilize them within your business!
When I was a Human Resources Professional, I worked with various payroll companies and this is what they all had in common: they over promised and yet underdelivered. They promised my company they could keep us in legal compliance with the notorious CA wage and hour laws and help us manage all of our Human Resources issues with dedicated HR support . What they delivered wasn’t even half that.
#1 They are a Tool to Produce a Paycheck, not to Protect you from a Lawsuit
They can’t protect your business from losing a lawsuit because, simply put, they’re not Lawyers. This is a big “duh!” of course, but the way my payroll reps promised legal compliance by utilizing their tool, you would think they were lawyers. Or, at the very least, compliance experts. The truth is, they’re not compliance experts. They are a tool to utilize in order to produce an employee paycheck. They are not the only tool, as some companies still pull out the old checkbook, but in the age of technology, they are the best tool to quickly and easily produce an employee paycheck. order takers. But again, they are not compliance experts. Which means they are not going to flag your payroll for compliance issues. They’re not going to explain and cross check overtime calculations for compliance with CA law, because they’re going to rely on their tool to tell them it is correct. But sometimes tools break. And as an HR practitioner in the past, our payroll calculations were wrong many times and it was HR that flagged this, re-calculated it, painstakingly reviewed timesheets, interviewed employees, and issues back pay. Not the payroll company. Paying employees at the incorrect hourly and overtime rate is among the top 5 reasons California Employers get sued.
As a small business owner managing multiple priorities, if you don’t understand the correct payroll calculations, overtime and meal break rules and how to implement them for your specific industry, and you don’t know the right questions to ask, you are left with huge gaps of liability.
So, while Payroll Companies want to advertise as proactive compliance partners, they are really an order taker-they will complete the tasks you specifically tell them to run. You can’t expect the order taker to anticipate your needs or offer suggestions, because their job is simply to take the order, not to tell you where you are exposed to liability.
#2 They Can’t Replace Dedicated Human Resources Support
Most payroll companies, in order to stay competitive, have added Human Resources Support to their membership services. This makes sense because the two go hand in hand. Even when I was an HR practitioner myself, there were many HR functions I utilized within my payroll system such as employee onboarding, benefits, and recruitment. But what it can’t do is replace an experienced professional with years of practice in making important decisions to complex problems. It also can’t analyze your current compensation structure and make recommendations for legal compliance BEFORE you get sued. It can’t learn your operation and understand the nuances of running your unique business, build rapport with your employees to increase transparency and retention, and leverage that relationship when it comes time to terminate an employee or give difficult feedback. This is the role of a savvy HR professional and it can’t be duplicated by a payroll service that offers it as a bonus to membership.
Here’s What they Can Do
They can process your employee paychecks and reports in the manner you determine. You tell them what to do and they will spit out a check for you. They can provide some common documents such as employee tax forms and standard job applications. They can help you track your recruitment leads and onboard new employees in an organized and streamlined fashion.
So utilize a payroll company in the way they are intended, but don’t fool yourself that they are able to protect you from a devastating lawsuit.
*As always, this post is not legal advice and does not replace seeking the legal counsel of an attorney.