Not all businesses opt to pass on payroll job

By Barry Flynn
Orlando (Fla.) Sentinel

When you run a small business, you are responsible for everything. But Jerry E. Pierce, whose Restaurant Equipment World has about 30 employees, draws the line at doing his own payroll.

Instead, Restaurant Equipment World, which distributes and installs restaurant equipment, sends the work out to a professional payroll company that takes care of it for him.

In contrast, Pierce's friend, W. Bruce O'Donoghue, is more hands-on. O'Donoghue's Control Specialists Co., a distributor and installer of traffic signals and related equipment in Winter Park, Fla., also has about 30 employees. But he keeps his payroll chores in-house.

Who's right?

Maybe both, depending on each business's specific needs. Both men have thought long and hard about which is the better way of doing things, and each makes a good case for the one he has chosen.

For about $25 an employee each pay period, Pierce, whose business is based in Orlando, Fla., gets a wide range of payroll and benefits services for himself and his employees. Pierce reckons that's a good deal.

"They become our in-house human relations department," Pierce said recently.

Pierce uses Paychex Inc. of Rochester, N.Y., a major player in the business nationally. But there are plenty of other vendors.

Paychex does the calculations for Restaurant Equipment World's taxes and tax deductions for each employee, pays workers' compensation premiums and handles benefits such as health insurance.

Paychex also administers Restaurant Equipment World's 401(k) retirement plan. And best of all, Pierce said, if there are any errors or problems, Paychex gets to sort them out.

O'Donoghue sees it differently. He used a vendor for a while about 10 years ago but found he could do the payroll in-house more cheaply.

"It probably takes one of my people two or three hours to do it, from beginning to end," he said.

Actually, Linda Andersson, who serves as Control Specialists' accounting and administrative manager, figures she can knock off the biweekly payroll in "half an hour at the most," she said.

Andersson uses a software program that manages the accounts on computer.

Much of the work Control Specialists' employees do has to be charged to different customer accounts, Andersson said. So she would have to do that work even if Control Specialists used a vendor.

When Control Specialists put the payroll work out to a vendor, "we had to fill out the paperwork the way they wanted it, and then we had to enter it into our system for job-costing," Andersson said.

By doing the work in-house, O'Donoghue figures he can keep his payroll costs down to between $2 and $4 per payroll check each pay period.

Of course, that does not include some of the extra costs he has to pay for services that Pierce gets in his inclusive package.

For example, Control Specialists has to pay extra for a third party to administer the company's 401(k) plan. Paychex handles that kind of work for Restaurant Equipment World.