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.
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.
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.
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:
Simplify How You Pay Workers with TCWGlobal
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:
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.
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.
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.
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.
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.
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!