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Hank Berkowitz

Will the Election Impact Payroll Taxes?

Top thought influencers and solution providers from the marketplace share their insights.

October 6, 2008
by Hank Berkowitz

Payroll and human resource administration is one of the fast-growing practice niches for CPAs and a key client retention tool. However, as technology continues to make its imprint on the vendor landscape, the variety of solutions on the market — not to mention the risks of making the wrong choice — have never been more pronounced. To help CPAs understand the benefits and caveats of managing payroll and HR administration solutions for their clients, the AICPA CPA Insider™ team invited top thought influencers and solution providers from the marketplace to share their insights. In my last column, our experts disclosed some benchmarks that CPAs can use to demonstrate the ROI of offering payroll solutions to their clients and whether they saw a trend towards paperless with more firms automating Payroll and HR functions.

Joining us this year (listed alphabetically) are: Michael Alter, president of SurePayroll, Inc.; Dr. Chandra Bhansali, president and co-founder of AccountantsWorld, LLC; Robert Digby, CEO of PayChoice, Inc.; Jim Heeger, CEO of PayCycle, Inc.; James Paille, director, payroll business strategy & development of myPay Solutions (Thomson Reuters); Walter Turek, senior vice president, sales & marketing, Paychex, Inc.; and Don Weinstein, division vice president, strategy and marketing, ADP Small Business Services.

What is the impact of the aging U.S. workforce on your current (or planned) Payroll or HR solutions offerings?

Robert Digby (PayChoice): We need to be able to offer solutions that take an aging worker from earning to retirement more easily. From a solutions perspective, it may mean making our employee self-service applications more usable for the less technologically savvy or making fonts more readable on the web. From a benefits perspective, it may mean 401(k) solutions that easily get redirected into an annuitized payout for retirement.

Michael Alter (SurePayroll): Our service is geared toward small businesses with fewer than 100 employees. These businesses employ a huge portion of the aging workforce, but haven’t historically been able to provide the same level of benefits as the larger companies. As the workforce ages, there is obviously more of a need for good health care and retirement benefits. SurePayroll recently launched two new services that make it simple for small businesses to offer affordable, high-quality health insurance and retirement solutions.

How have company payrolls been affected by the recent spike in energy and commuting costs?

Digby: It’s an issue across the board. You have to remove traditional overhead. All payroll companies are dealing with this issue and it is driving PayChoice to radically embrace electronic sales wizards, paperless delivery and online employee self-service tools across all of our business lines. Companies who run their payroll and HR business as they did five or 10 years ago will be at a distinct disadvantage.

Jim Heeger (PayCycle): In a study we did in July, we found that nearly half of small businesses are scaling back payroll due to the economy. Forty-seven percent of small business owners indicated they are taking action to reduce payroll by laying off staff, not giving raises or offering days off instead of pay increases, to preserve cash. In times of economic uncertainty, small businesses are especially concerned about preserving cash.

Alter: Every month, we aggregate and analyze our data to see how the small business economy is faring. We also survey our payroll customers to get a pulse on how they are feeling about the economy. Energy costs have really put a damper on the economy, but small businesses are incredibly resilient. Nationally, on average, small businesses are still hiring and growing.

Interestingly, the high energy prices have helped our business. As a provider of online payroll and HR solutions, we've seen demand peaking for online software that can be accessed anytime from anywhere … and doesn't require that you drive over to the office to process payroll.

James Paille (myPay Solutions/Thomson Reuters): For firms that manually deliver or use a courier service for payroll checks, the impact has been significant. However, for firms that take advantage of online payroll processing and delivery, higher energy costs have had little to no effect. The same is true for staff turnover. Firms that operate in a “commuter” mode are experiencing higher turnover rates due to higher gas prices and the cost of commuting. While firms that offer telecommuting, that is the ability to work from home via online access, aren’t feeling as much of an effect.

How do you expect the November election to impact payroll taxes, Medicare, unemployment benefits? How is your company addressing changes that may be on the horizon?

Dr. Chandra Bhansali (AccountantsWorld): Whatever the changes may be, with over 20 years’ experience of implementing changes in tax laws and payroll regulations we have the expertise to implement any regulatory changes in a timely manner.

Digby: Regardless of the election outcome, it’s clear that GDP growth estimates are being revised downward, inflation is up, financial and housing markets remain unstable and many state and federal entities are starved for revenues. My sense is that we’re going to see significant modifications to wage bases and tax rates as the new administration attempts to address these issues. Roth retirement solutions may be far more important for employees from a future tax perspective and, as always, employers are going to need help managing payroll and HR to remain compliant with the complex and changing tax regulations.

Alter: Regardless of who wins the election in November, there will most likely be changes that will impact payroll regulations, as well as health care and retirement benefits. As a full-service software as a service payroll and HR company, we’re in an excellent position to quickly adapt to these changes. There would be no reason for our customers or CPA partners to worry about making tax table updates or spend time making system changes that affect deductions. We can make changes dynamically and release them almost instantly.

Do you have any success stories you can share with us about CPAs offering Payroll/HR Solutions to their clients?

Bhansali: J & J Associates of New Britain, CT, is a good example of how AccountantsWorld has helped many initially skeptical accountants and CPAs establish a successful, highly profitable payroll practice: first, by educating them about how Payroll Relief will totally transform payroll processing for their firm and then by offering them the training and marketing support they need. Julius Janusz didn’t originally want to engage in payroll because he did not think it would be a profitable service. But after speaking with one of our Practice Development Consultants, Roger Batista, he decided to give Payroll Relief a try. We helped him in every phase of starting and growing his payroll practice and today he has 46 payroll clients. The most rewarding moment for us was the day in last April when he visited our offices to thank us in person for helping him uncover this hidden treasure.

Digby: Probably the biggest success stories we’ve encountered are the CPAs we’ve set up in business over the past 18 years with our software and comprehensive suite of related products, such as “pay as you go” worker’s compensation, time and attendance systems, retirement plans and online HR products. We can offer full-service payroll on an outsourced basis, online payroll products and payroll software licensing solutions to CPA firms. Because of the flexibility our solutions, we’ve been an industry leader in the CPA payroll community for many years. It’s something about which we’ve been extremely proud.

Heeger: David Awe, CPA, is able to do payroll for 74 clients with minimal administrative support using PayCycle. Many of David’s payroll clients are parishes. Because the service is online, he’s been able to take on a number of affiliated parishes that are out of state. David estimates that as much as 60 percent of his payroll business is from out-of-state clients.

Alter: Sure. I have a great example. Jamie Aggee began using SurePayroll’s reseller program in order to quickly and easily service clients throughout the country. He turned to us after running payroll for his clients in-house for a number of years. He wanted to continue to offer payroll, but didn’t want the labor-intensive task of keeping up with the different payroll tax rules and regulations mandated by each state. Now he runs payroll for dozens of his clients using SurePayroll and says he saves a tremendous amount of time with our extremely user-friendly system.

Paille: Yes, we have many user success stories that we post on our Web site and we are happy to share a few examples. Specific to payroll services, we have highlighted select Thomson Reuters users in our Solutions newsletter and in client testimonials. To view a full article in Solutions, visit: http://cs.thomson.com/support/reference/solutionsnl.aspx and select “Volume 5, No. 3, Working & Unwinding in Waikoloa” from the list. To view a payroll-specific testimonial, visit: http://cs.thomson.com/lovemyjob/otto.aspx.

There you have it. All the experts agree there’s much to gain from offering payroll and HR solutions to your clients. Before you know it, you’ll have a more booming practice than you ever thought possible and productivity gains that are both immediate and easily measurable.

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Hank Berkowitz is the former publisher of AICPA’s Insider™ electronic newsletter group.