Payrolling - What Is It and What Are Its Benefits?

Overview of Payrolling

Payrolling means transferring some of your employer responsibilities to a payrolling, or as it's also known, an employer of record company. This company handles payroll and legal employment duties for your workers.

The payrolling company officially employs the worker but continues working for your business. This article explains everything about payrolling, how it differs from using employment agencies, and the benefits and drawbacks of this approach.

Payrolling involves partially outsourcing your responsibilities as an employer. A payrolling company manages payroll and assumes legal employer duties for businesses with one or more workers.

The worker is integrated into the payroll system managed by the payrolling company like TCWGlobal, yet they continue their role with the hiring company. This article explores every aspect of payrolling, detailing its distinctions from employment agencies and examining its advantages and disadvantages.

Contents:

1. Key Takeaways
2. What is payroll? How does it differ from payrolling?
3. What is a payroller, and how much does payrolling cost?
4. Advantages of payrolling for employers
5. What does a payrolling contract look like?
6. Cooperation between HR and the payrolling company
7. Frequently Asked Questions

Key Takeaways:

• Administrative Relief for Employers

  Payrolling and employer of record services significantly reduce the administrative burden for businesses. These services manage payroll, taxes, benefits, and compliance with employment regulations, allowing employers to focus on core business activities.

• Cost Structure

  The cost of payrolling typically involves an all-inclusive rate, often ranging from 6% to 10% of the worker's salary. This rate includes the worker's salary, taxes, benefits, and administrative fees. Businesses should ensure transparency with the payroll company to understand the full extent of these costs.

• Legal and Compliance Benefits

  These services are legal and widely used, helping businesses stay compliant with employment laws and regulations. By handling administrative tasks and legal responsibilities, payrolling and employer of record services provide a convenient and compliant solution for managing workers, particularly for short-term or temporary positions.

What is payroll? How does it differ from payrolling?

Payroll refers to managing worker payments. Typically, a worker is directly employed by a company and is part of that company's payroll. In payrolling, the worker is legally employed by a payroll company, and the hirer outsources payroll management. The worker operates for the client (hirer), but the payroll company is the legal employer.

What is payrolling and how much does payrolling cost?

A payrolling agency legally employs your staff, handling payroll administration, contract creation, worker updates, sick reports, and pay stubs. This saves employers significant time, especially with short-term staff. Payrolling reduces risks for employers, as the payrolling company manages benefits and premiums.

Payrolling operates at a pre-agreed, all-inclusive rate. Typically, payrolling companies charge a rate based on the worker's salary plus a small margin for their services.

Advantages of payrolling for employers

Payrolling provides many benefits for companies compared to hiring through employment agencies or temporary staffing firms. The biggest advantage is that you are no longer the legal employer of the workers, which saves your company a lot of time on administrative tasks, potential legal hassles, and more. 

Other benefits include:

• Meticulous management of complex administration using advanced software.
• Shifting legal employer risks to the payrolling company, providing clarity on wage costs.
• Easier hiring and termination of workers.

Simplify How You Pay Workers with TCWGlobal

What roes a payrolling contract look like for an American company?

A payrolling contract in the United States typically involves three parties: the worker, the payroll company, and the hiring company (the client). The contract outlines the roles and responsibilities of each party and includes some of the following key elements and more:

1. Worker Details

   Information about the worker, including their job title, duties, and employment terms.
   
   

2. Compensation

   Details of the worker's salary, payment schedule, and any benefits provided.
   
   

3. Legal Employer

    The payroll company is designated as the legal employer of record, responsible for managing payroll, taxes, and compliance with employment laws.

Cooperation between HR and the payrolling company

HR and the payroll company have overlapping tasks but distinct responsibilities. HR handles recruitment, selection, supervision, and worker development, while the payrolling company manages employment, payroll, personnel records, and final payments. Effective collaboration is crucial. The payrolling company can take over some HR tasks for smaller organizations without an HR department, such as recruitment and selection, on and off-boarding, and more. 

Frequently Asked Questions:

Is payrolling legal?

Yes, payrolling and employer of record services are still allowed. These services are legal and widely used to manage payroll and employment responsibilities. Today more than 40% of companies utilize these services.

They help businesses handle administrative tasks and comply with employment regulations, providing a convenient and compliant solution for managing workers.

How does an employment agency differ from a payrolling company?

Employment agencies primarily focus on recruiting and selecting workers, while payrolling companies, or employer of record agencies, relieve employers of administrative tasks. With a payroll organization, the employer retains the freedom of recruiting and selecting workers.

How does payrolling work in relation to tax in the United States?

In a payrolling arrangement, both employers and workers are responsible for contributing to Social Security and Medicare taxes, as well as paying federal and state income taxes. 

Typically employers deduct the necessary taxes and contributions from workers' salaries and remit them to the Internal Revenue Service (IRS) and relevant state tax agencies. 

But when hiring an employer of record or payrolling agency these deductions and payments are managed by them, including mailing of W2's, ensuring compliance with all tax regulations and relieving you of significant and time consuming duties. 

What are the costs of payrolling?

The costs of payrolling can vary based on several factors, including the specific services provided and the worker's salary.

Typically, payrolling companies charge an all-inclusive rate that covers the worker's salary, taxes, benefits, and administrative fees. This rate is often a percentage of the worker's salary, generally ranging from 6% to 10%.

Additionally, there may be costs associated with specific services, such as handling sick leave, holiday pay, and other administrative tasks. Businesses need to review the cost structure and ensure transparency with the payrolling company or agency to understand the total expenses involved.

Need Help?

Whether you need expertise in Employer of Record (EOR) services, Managed Service Provider (MSP) solutions, or Vendor Management Systems (VMS), our team is equipped to support your business needs. We specialize in addressing worker misclassification, offering comprehensive payroll solutions, and managing global payroll intricacies. 

From remote workforce management to workforce compliance, and from international hiring to employee benefits administration, TCWGlobal has the experience and resources to streamline your HR functions. Our services also include HR outsourcing, talent acquisition, freelancer management, and contractor compliance, ensuring seamless cross-border employment and adherence to labor laws. 

We help you navigate employment contracts, tax compliance, workforce flexibility, and risk mitigation, all tailored to your unique business requirements. Contact us today at tcwglobal.com or email us at hello@tcwglobal.com to discover how we can help your organization thrive in today's dynamic work environment. Let TCWGlobal assist with all your payrolling needs!

Additional Information

Payrolling services are an essential component for businesses seeking to streamline their operations and ensure compliance with labor laws. Payrolling, often managed by specialized companies like payrolling partners such as TCW Global, involves transferring the administrative burden of payroll management to a third-party payrolling company.

This service offers a range of benefits, including cost savings on payrolling expenses and ensuring accurate, timely payment to employees and contractors. Companies like WMBE Payrolling Inc provide comprehensive payrolling services for contractors, handling everything from payroll calculations to tax withholdings.

Understanding what is payrolling and what is payrolling benefits can help businesses leverage these services to reduce administrative overhead and mitigate risks associated with payroll errors.

For businesses utilizing an employer of record (EOR) payrolling model, the advantages extend even further.

This model allows companies to manage their workforce more efficiently, particularly when dealing with contractors. Contractor payrolling through direct payrolling & staffing services provides a seamless process where the EOR assumes the responsibility for employment-related tasks, including compliance with local regulations.

What is payrolling in staffing? It's an arrangement where a payrolling company takes on the employer responsibilities, allowing businesses to focus on their core activities.

Whether you're exploring payrolling definition, payrolling kosten (costs), or specific services like those offered by TCWGlobal, understanding these elements is crucial for making informed decisions. Give us a call today!