Sponsored by: AccountantsWorld, ADP, Paychex, Inc.
Long gone are the days when administering payroll meant writing a simple check for hours worked. CPAs are involved in a host of complex payroll and employee benefits issues. This special report discusses hot topics including regulatory changes and technology trends with executives from three payroll services companies: Chandra Bhansali, co founder and president of AccountantsWorld, (accountantsworld.com), a firm specializing in cloud-computing solutions for accountants; Andrew Childs, vice president of marketing, Paychex, Inc. (paychex.com), provider of payroll, human resource and benefits outsourcing solutions for small- to medium-sized businesses; and Anish Rajparia, president of ADP’s Small Business Services (adp.com), which specializes in business outsourcing solutions, including payroll services.
What should accounting firms consider before offering payroll service to clients?
Chandra Bhansali, AccountantsWorld: We believe there’s only one valid reason for a firm to offer payroll services to clients—to expand its practice and make more money by capitalizing on existing relationships. The most successful firms that offer payroll services realize this and, during the initial phase, they focus on growing their payroll practices and making them more profitable. Fringe benefits such as improved client retention and stronger client relationships will automatically follow as a bonus.
Unlike tax and accounting services, payroll services require minimal professional time. The right system automatically takes care of all compliance work, with additional tasks performed primarily by clients and paraprofessionals. However, CPAs considering implementing payroll processing services should keep in mind that these services do require focused processes.
Andrew Childs, Paychex: Offering payroll services isn’t necessarily a good fit for every accounting firm, and there are many factors to take into consideration before making a final decision. Firms should evaluate client demand, staff capacity, the viability of payroll processing as a revenue source, the level of involvement they’d like to have in the process and the associated compliance risks.
As a trusted adviser to their clients, accounting professionals must identify and recommend the solution that best meets their clients’ needs. As more and more business owners look beyond payroll processing for a comprehensive HR offering, CPA firms often find it challenging to provide all of the functionality clients have come to expect—including retirement services, pretax benefits, health insurance and workers’ compensation administration. Another important consideration is the increasing complexity of state and federal tax regulations.
New rules and regulations are proposed and enacted at the federal and state levels at an overwhelming pace, making it difficult for accounting professionals offering payroll as a value-added service to stay up-to-date.
Partnering with an experienced provider such as Paychex makes it easier for accountants to meet the full HR needs of their clients while ensuring compliance. Paychex is proud to be the payroll and HR services provider for the AICPA Trusted Business Advisor Program.
Anish Rajparia, ADP: Any accounting firm that wants to offer payroll services should have:
1) a dedicated person on staff with payroll expertise;
2) procedures for managing compliance with federal, state and local payroll taxes;
3) a process for keeping apprised of the rapidly changing tax legislation in those jurisdictions in which the firms’ clients operate;
4) a means by which the firm can rapidly incorporate regulatory changes into their systems; and
5) access to state-of-the-art technology and features, such as direct deposit and integration with items such as workers’ compensation and retirement plan contributions so that clients are receiving a competitive offering.
There are compelling advantages for accountants to offer payroll services to their clients. For example, having another client “touch point” may deepen relationships and improve retention rates, and offering a payroll service may not only add to the revenue stream and boost profits but also level out seasonal work and cash-flow variations. And many clients—especially small businesses—appreciate having an accountant who’s a trusted adviser in many aspects of their business.
However, accountants could expose themselves to some risk if they lack the expertise and resources necessary to adequately meet their clients’ needs. Forming a strategic partnership with a payroll service expert could mitigate the risk. Thousands of accountants partner with ADP® to help address the many complexities associated with payroll, human resources, benefits administration and tax compliance. RUN Powered by ADP Payroll for Accountants®, for example, is an example of an efficient, proven and trusted solution for accountants offering payroll services.
How is cloud computing changing the payroll space?
Chandra Bhansali, AccountantsWorld: Cloud computing has not only leveled the playing field for accountants, it has also given them major competitive advantages over payroll service bureaus, which have significant sales and marketing expenses.
Previously, only payroll service bureaus had access to powerful processing centers that automated the entire payroll process. The tools accountants had were no match for the processing power of the service bureaus. Today, the Internet has completely leveled the playing field. Accountant-Centric payroll services such as AccountantsWorld’s Payroll Relief give accountants access to processing power comparable to that of the service bureaus, and thus allow accountants to offer a less expensive and more personalized service.
Anish Rajparia, ADP: One of ADP’s claims to fame is that we’re the original cloud computing payroll services company. Cloud computing is deeply entrenched in the industry today, and it gains more traction as cloud-based payroll applications become more sophisticated. Offering a cloud-based solution allows human resources management to become increasingly interconnected with others, including accounting and CRM. In addition, as cloud-based systems migrate down-market, other systems such as those for human resources planning and employee communications become increasingly interconnected as well.
Security of data is always a big concern. What kinds of security questions should prospective clients ask of potential payroll providers?
Chandra Bhansali, AccountantsWorld: We believe that a full security audit statement from a reputable company is one good indicator of their level of security. Therefore, an important question to ask the provider is if they have had a security audit done, and if any lapses were found.
Anish Rajparia, ADP: Clients should insist that their payroll providers have state-of-the-art data and related security policies and systems in place and that those systems are continuously tested to ensure their integrity.
Security policies and best practices should be implemented across all aspects of the information life cycle, including protecting client data; using secure applications (for example, antivirus protection, firewalls, monitoring and intrusion detection, and data-loss prevention); deploying encryption for laptops and portable devices; managing vendor and business partner relationships; providing ongoing training and compliance; and maintaining secure facilities and data centers.
Clients should also ask about their payroll provider’s history of performance in this area, and what kinds of insurance policies are in place to protect against malicious activity.
What should accountants and finance managers expect from payroll solutions vendors in terms of new innovations in service and technology in the next 12 months?
Andrew Childs, Paychex: Innovations will continue around a simplified user experience that is web- and mobile-based. The market is growing more confident and comfortable with processing payroll online, and businesses want accessibility from multiple locations. Online technology has made payroll outsourcing more accessible—not just to larger companies, but to companies of all sizes.
We’re seeing a similar trend with broader human resource and benefits outsourcing. Small- to medium-size businesses now have the option of using an HR service that combines online resources, such as libraries, employee handbook tools, and training Web seminars, with access to certified HR professionals. It allows employers to confidently take a self-service approach to their HR needs with the comfort of having professional support at their fingertips.
Chandra Bhansali, AccountantsWorld: The most important innovation coming up in payroll processing is mobile payroll. Accountants and finance managers will be able to perform routine payroll tasks, such as data entry, direct deposit, tax deposit and tax filing—all from their mobile devices. Payroll Relief is leading this charge—we already provide extensive support for mobile devices to securely perform all of the functions mentioned above. Payroll Relief also offers employees the convenience of viewing their pay stubs and W-2s from their mobile devices.
Anish Rajparia, ADP: Many exciting innovations improving all aspects of payroll workflows are on the horizon. For example, mobile payroll applications are becoming critical for business owners who want to manage employees working out of the office. Mobile applications also enable employees to access pay, retirement, attendance, and other information remotely, thus improving productivity and efficiencies. Technology also yields more data that, in turn, can help us provide more substantive and timely analytics to our clients.
Social media will continue to become the new word of mouth as customers seek more vendor interactions and access to data and information online. Social and mobile networks will include greater functionality, and the need to adopt and grow these applications will increase as these online communities expand. Also, the ability to develop, market and support products and services via online communities will continue to move to the mainstream.
Have recent reforms and legislative initiatives had an impact on the finance/accounting aspects of payroll and employee benefit functions? How does your company’s solution help to address the changes?
Andrew Childs, Paychex: The regulatory environment is now more demanding than ever for CPAs whose job it is to make sure clients stay in compliance. The volume of changes is almost overwhelming, and it comes from a wide variety of sources.
At the federal level, certain aspects of health care reform, including the Small Business Tax Credit and the new rules around Form W-2 reporting that begin for tax year 2012, remain foremost. On the retirement side, the Department of Labor’s new disclosure requirements for retirement plan fees will be effective in 2012, and legislation has been presented in Congress, which, if enacted, would restrict the ability for plan participants to take loans from their 401(k)s. At the state level, continued high unemployment levels have resulted in many states imposing special assessments or increasing unemployment tax rates on employers.
With significant federal and state budget challenges, we expect to see many more federal and state-level tax, economic stimulus and regulatory changes as the year progresses. Paychex has a team of compliance experts who spend thousands of hours monitoring the potential impacts of these changes to help ensure our CPA partners and our clients can remain in compliance.
Anish Rajparia, ADP: ADP makes on average more than 1,000 programming changes every year to help clients comply with rapidly evolving laws and regulations affecting the workplace.
A number of noteworthy developments relative to HR and payroll have emerged from the 2010 Patient Protection and Affordable Care Act [PPACA]. For example, large employers [50+ employees] will need to offer health care that meets minimum standards [yet to be defined] to all full-time workers—or pay a penalty based on new testing and recordkeeping provisions—and file new reports with the IRS regarding details about their health plans.
Other provisions of health care reform will take effect both before and well after 2014. For example, employers may have to automatically enroll all employees into the CLASS Act, a new federally run long-term care insurance program, to take effect in 2013.
Chandra Bhansali, AccountantsWorld: Payroll Relief is
compliant with the reporting requirements for the cost of
employer-provided health coverage on Form W-2, Box 12 under new Code
DD. For 2012, Payroll Relief calculations will take into consideration
the new Medicare tax increase for high earners. Beginning with tax
year 2013, Payroll Relief will limit the amount of salary reductions
for health FSAs to $2,500.