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Top HR/Payroll Tips for Technology Startups

24 Oct 2017

Human Resources (including payroll) is often one area that technology companies tend to neglect in their earliest stages. While many companies will have a payroll processor or a Professional Employer Organization (PEO), HR tends to fall to the responsibility of an office manager, administrator, or finance person who may have some prior knowledge but not all that is required to properly mitigate the many risks associated. As they grow, many technology companies do not handle these problems, often leading to later lawsuits and public relations issues, as well as controversy with federal, state, and local taxing authorities. Here are some tips that can be used to help with payroll and HR:

Use a Payroll Processor (PEO)

Payroll processing companies, such as Paychex and ADP, will process payroll for companies, allowing for payment of taxes, filing of returns, and direct deposits to employees. The processor assists you with these tasks, but ultimately the responsibility is still with the company and its officers. The employees’ wages are reported under the Employer Identification Number (EIN) of the company, and the company is required to file a quarterly and annual return with the appropriate states and federal authorities. Given that the company is still processing payroll on their own, the processor offers little in the way of HR support and relieving the administrative burden.

An alternative to a payroll processor is to use what is known as a PEO. In this case, you enter into a co-employment relationship where the employee is still an employee of your firm, but their wages are reported on the EIN of the PEO. The benefits of a PEO include additional HR support, access to lower group health rates, and a much-decreased administrative burden.

Understand the Compliance Basics

Compliance with federal, state and local authorities is crucial when considering payroll. Compliance work includes proper registrations with the IRS and states where you have employees, maintaining required insurance coverage like workers compensation and disability, having all required employment documents, and the timely filing of payroll tax returns.

The major employee documents required for compliance are IRS Forms I-9 (employment authorization) and W-4 (employee withholding). These should be completed, along with any supplemental paperwork, prior to starting employment.

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