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February 2001
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Small & Home Office

Payroll via the Internet: Here's an Easy Way to Reduce Your Overhead and Bureaucracy

You can get a lot of flexibility as well as peace of mind by processing your payroll online.

By Edward Poll

Checklist for Picking a Payroll Provider

1. What is the cost for your service for one year, including W-2 forms? What is the minimum commitment?

2. If I need to change some basic employee information such as address or pay rates, how quickly do the changes take place? What is the procedure?

3. Is your system simple to use or do I need specific training?

4. Does it cost extra to file taxes for multiple states?

5. How do I enter my payroll data? Do you offer an Internet option?

6. Does the basic service include tax filing and payment, direct deposit, printed checks and quarterly reports?

7. How can you ensure accuracy of the data? Do you offer a payroll preview before submission?

8. Can you track vacation and sick days for each employee?

9. Do you offer department codes?

10. Do you guarantee no IRS penalties, so long as the information provided is accurate?

PROCESSING payroll can be a headache. Make a mistake or be delayed because of a trial or other client obligation, and you will have hell to pay.

Make a mistake and you will not be forgiven. Get it right and no one pats you on the back. If nothing else, employees expect to see an accurate paycheck each pay period.

Large or small, all firms have to deal with payroll. While larger firms usually have at least one staff person (if not a whole department) dedicated to payroll issues and tax compliance, most smaller firms do not. In these cases, it is often the senior partner or sometimes a spouse who manages payroll.

For some firms, processing payroll in-house is the bane of their existence. Others gladly pay the higher fees to outsource so that they can focus billable hours on their clients. Competition for this outsource service is keen, though limited. Large companies such as ADP and Paychex provide "hard copy" services that either direct deposit payroll for employees or deliver checks to the firm for signature and personal distribution to employees.

But the Internet now offers viable alternatives for smaller firms and businesses. Among the online services: ADP; Paymaxx; Ceridian, and

There's even a Web site -- Buyerzone -- that offers information about various payroll vendors and provides free quotes.

Payroll services such as these receive the raw data from the firm. This data includes pay rates (hourly or monthly), frequency of payment, individual exemptions and time (hourly, daily, etc.) actually worked, plus all other relevant payroll data. The payroll service company then does all the calculations and prepares the checks for distribution.

Once the data is delivered to the service company, all of the steps that follow are performed by the service company, including the preparation of the quarterly and annual payroll tax returns. The individual law firm does not have to worry about changing regulations or employee tax rates; the service company is responsible for that. What a relief! One less thing to worry about. Now, I can go back to increasing my revenue!

There's even a Web site that offers information about various payroll vendors and provides free quotes.

-Edward Poll

William Gibson is an attorney with a solo practice and a small staff in Portland, Ore. A member of the LTN Editorial Advisory Board, Gibson juggles his time between clients, cases, trials, and managing his practice. He also serves as vice chair of the American Bar Association Law Practice Management section and is often invited to speak at various legal conferences.

"I knew I didn't have the time to manage the payroll myself, but I had certain requirements that needed to be addressed before I would consider switching to a payroll service," says Gibson.

"I needed the flexibility to run payroll on my timetable, which can sometimes be late at night or early in the morning," explains Gibson. "However, I wasn't interested in using a payroll software package, because I didn't have time to keep up to date on all of the tax changes."

Gibson also looked for the flexibility to enter payroll from anywhere and at anytime. He also wanted to be able to add a bonus, change a pay rate or simply make changes to an employee's basic information -- i.e., to have the ability to modify the information with instantaneous results. What finally drove him to turn to the Web was when he found a company that gave him the flexibility and control of software, combined with the convenience and hassle-free functionality of an outsourcing. With a Web-based payroll system, the user decides where and when to update or view the employee's hours. "It's great. I no longer need to worry that I am not in the office on pay day," says Gibson.

Another plus: the price fit into his budget. offers a flat fee of $19.95, plus $.50 per employee per pay period, about half the cost of traditional services.There's an advantage for employees, because the boss doesn't need to be in the office on pay day. Each employee can log into the Web site and view his or her current pay stub, previous pay stubs, as well as vacation and personal time.

For employees who want or need a printed check, enables users to print a check from the Web site to a local printer in the office, without downloading any software or installing any hardware. A record is created for the firm's accountant, as well.

For most law firms, the number one reason to outsource payroll is the time saved. This allows them to spend billable hours on their clients and not on managing the office.

Outsourcing also makes sense if you do not have time to keep up to date with the changing tax laws and other payroll issues. Many small firms find themselves faced with stiff I.R.S. penalties as a result of mistakes or delays. Accurate tax reporting and payment is usually guaranteed with payroll companies.

Another convenience of outsourcing payroll is delivery. For legal professionals who may not come into the office every day-- whether it's because they are on trial, at a document review or simply working at a separate location -- the hassle of delivering pay checks and direct deposit stubs can be eliminated. Employees simply log on to the secure Web site at any time and from any location to view or print their pay stub.

Edward Poll, based in Los Angeles, Calif., is a law practice management consultant and author of Secrets of the Business of Law: Successful Practices for Increasing Your Profits!

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