I am often asked by foreign companies entering the US about how to manage payroll and benefits for employees based in the US. When starting out in the US, foreign companies project a small number of US based employees and so are tempted to do it themselves. I’m often asked whether this is a good idea and my advice is very straightforward. Don’t go it alone. Start with a good payroll service provider and work the process from there. Here’s why.
50 States. 50 Rules.
The US is a relatively large country with 50 states that all have slightly different payroll administration rules. That is often very different from what foreign companies have experienced in their home country. Given the nature of today’s distributed workforces it’s likely that even a small operation will have employees in several states in the US in short order. Payroll taxes apply based on the home address of employees, not on the offices of the company. A good payroll service company can handle all of the various issues that confront an employer, state by state, so it makes sense to leverage their expertise.
More than just payroll
When setting up employees, there are other aspects of employment that need to be addressed in addition to establishing payroll. Are you going to be offering health insurance benefits? What about managing worker’s compensation insurance obligations. There are differences in these items by state as well. How are you going to manage those nuances? Finally, how about establishing an employee handbook that would act as a concise, yet comprehensive compilation of the laws and regulations with which you will have to confront and comply?
Room to grow.
Even a good payroll service with broad national coverage cannot handle every employee related issue you encounter, though, they can be an invaluable service provider. They can provide the mechanical processes, both people and technology, that will form the underpinnings for the efficient administration of your policies and practices. By outsourcing a non-core task, it frees you up to pursue the activities that require your focus and enables you to grow more efficiently.
In a future blog post we’ll address how to assess your payroll service and key questions to ask when interviewing prospective payroll service providers. For this post, the main advice is find a good payroll service provider and don’t try going it alone. There are too many details to manage and nuances to navigate, and it’s best to outsource it to the experts.