Request a call Login

  • Are you looking for a way to reduce administration costs for your small business? Have you considered how much time (and money) you would save if you didn’t have to prepare and process your payroll and payroll taxes?

    When you outsource payroll services, there are a number of benefits. The most essential for small businesses is that you can take the time you used to spend on payroll and devote it to building your business. 

    “Women operators at Midvale Company payroll machine in Time Office, April 29, 1949” by Kheel Center, Cornell University

    Benefits to Outsourcing Payroll Functions

    Greater business focus

    Your focus should be about growing your business and strengthening your core business strategy, not administrative details. 

    Reduced costs

    Using a professional employer organization (PEO) isn’t free, but many companies find significant cost savings by outsourcing their payroll. And, with a PEO like GMS, you can rest easier knowing that a team of payroll experts will protect you from risks like payroll tax penalties that directly impact your bottom line.

    More time

    If you’ve handled payroll or HR you understand how time consuming it can be. Calculating taxes, filing forms, and trying to keep up with different labor and tax laws could end up taking up large parts of your day. 

    Time order pink payroll record before leaving for WWII. Glenn Gaskins last payroll recod before entering WWII by wcgaskins59 is licensed under CC BY 2.0

    Maybe it’s time to consider a PEO

    As a professional employer organization, or PEO, our services and comprehensive solutions can provide options that will help effectively manage your payroll needs for you. Think about the time you will save by streamlining your system. 

    GMS’s payroll services include:

    • Full-service, Internet-based payroll processing
    • Payroll tax payment & filing
    • Time keeping systems
    • Workers comp calculations & filing
    • Electronic new hire reporting
    • Online payroll services available 24/7

    Read more about our what our team of payroll experts can provide for your payroll services. 

    Still have questions about our payroll services or how working with a PEO can save you money? We thought you might, so we added a Payroll Services FAQ section.

    Still not convinced? You don’t have to take our word for it, you can read the testimonials about our payroll & tax services. 

    What are your top payroll frustrations? Find yourself wishing you could spend your time at work doing other things than payroll administration? Let us know in the comments below.

  • Why did you start your business? Maybe because you are good at doing something. Maybe because you can offer a service that not many others can.

    You worked hard to grow your business, to show everyone why they should use your company for their needs. You are a professional, and nobody knows your business better than you do. So why would you ever consider outsourcing back office tasks to a PEO if you can do them yourself?

    At the end of the day, we all want the same thing: to be successful. Sometimes, to succeed we need to embrace the fact that we can’t always do everything ourselves.

    Image of a human resources outsourcing company.

    Why it Can Pay to Outsource to a PEO

    PEO stands for Professional Employer Organization. Just like you are a professional in your industry, GMS is a professional in ours. If you care about your business and your employees, you want to make sure that your company is a well-oiled machine! That’s why our team of well-versed, educated, and honest specialists help small to mid-sized businesses thrive every day. 

    We believe that just because you don’t have thousands of employees doesn’t mean you shouldn’t have access to the same buying power or experts! 

    As a business owner, doing everything yourself can be overwhelming, especially when you find that some areas are getting neglected or are distracting you from the business. 

    By outsourcing basics like payroll management, workers’ compensation claims, benefits administration, and any human resource function to GMS, you can acquire better, less expensive services than if you were to go hire an individual to do that for you. 

    A PEO can help you go back to focusing on your business knowing that these things aren’t just being done, but that they’re being done right. Contact us today to talk to a GMS representative about how we can help you and your business.

  • Payroll is an important part of every business. While some small business owners take the time and effort to handle payroll administration in-house, certain factors can signify that outsourcing payroll with a PEO might be in your best interest. Here are some signs that it may be time to consider a switch.

     Image of a business owner considering online payroll services.

    1. When You Just Don’t Have Enough Time

    Business owners have plenty of work to do, and managing payroll is just another task that fills up your schedule. According to business counseling nonprofit SCORE, over half of small business owners spend at least 3-to-5 hours each month to manage payroll in-house. 

    Those are valuable hours that could be spent focusing on ways to grow your business. Depending on how much you work each week – The Alternative Board cites that half of small business owners work more than 50 hours per week – outsourcing these services can save you that precious time that owners constantly need.

    2. When You’re Worried About Payroll Tax Compliance

    Compliance issues can come about in a couple of different ways.  As discussed, processing payroll is a time intensive and tedious process, which can cause certain compliance requirements to slip through the cracks.

    Additionally, you may lack the expertise in knowing exactly what you need to do to keep your payroll compliant with any related regulations. Either way, mistakes can happen when you haven’t been trained to handle payroll.

    Just how big of a concern are payroll tax penalties? In 2013, the IRS doled out 6.8 million penalties, costing business owners a combined $4.5 billion in fees. These penalties range from simply not filing your payroll taxes on time to more complicated issues like not weighing multi-state payroll compliance needs for minimum wage and other regulations. If you’re not careful, you might be subject to some fines, on top of the time and money spent managing your payroll.

    3. When You’re Tired of Dealing with Paper

    After years of managing payroll, a business can go through a lot of paper. While some owners are attached to handing out physical checks, paper documents build up over time and take up plenty of storage space. That also means that you have to dig through all those files when you or your employees need to reference old documentation. With online payroll, those hassles are eliminated, as everything is securely stored online and can be accessed 24/7 with an internet connection. 

    There’s also the monetary benefit of cutting out paper payroll. Offices tend to save “roughly $80 per employee (annually) in costs related to paper, ink, toner, storage space, and postage” by switching to paperless payroll. Also, many PEOs won’t charge you extra for direct deposit services, so you’ll save a decent chunk of money for switching to a service that makes the payroll process simpler for both you and your employees.

    4. When Your Business Starts to Grow

    Business growth is great, but it comes with some extra responsibilities. As your business grows, so does your payroll. That means that payroll management will take longer, involve more chances for error, and make for even more paper printouts. Of course, it also means that other parts of your business may require more attention as well. It’s a good problem to have, but one that requires your full attention for your business to continue to grow.

    Whether your business is growing or you’re noticing another sign that it’s time to outsource your payroll, Group Management Services can help. As a Professional Employer Organization, we specialize in providing comprehensive HR solutions for businesses, including online payroll services. Contact GMS today to talk to one of our experts about how we can help your business through payroll management.

  • Let’s be honest; what business owner looks forward to managing payroll? While payday may be exciting for your employees, it’s likely that you’re not thrilled about having to put together payroll reports, track deductions, and oversee every other critical aspect of payroll administration, especially if you do everything by paper. 

    For some small business owners, payroll administration is just a necessary part of business life and the business isn’t big enough to justify its own HR department. While payroll administration is necessary, it doesn’t have to be a big burden. Online payroll software can give you the tools to take some of the pain out of payday preparation. Here are a few questions you should consider when evaluating your payroll management process.

    Small business owner using online payroll software. 

    Do You Spend Too Much Time on Payroll Administration?

    Payroll management takes time. A survey conducted by the National Small Business Association found that more than half of owners who handled payroll internally spent at least three to five hours per month on the administration of payroll taxes alone. That time doesn’t even include other key payroll functions like processing paychecks, keeping records, and answering questions from employees. 

    Five hours per month may not sound like a lot, but it adds up to 60 hours of payroll administration per year. That’s more than a full work week of time solely dedicated on payroll, and that’s if you only spend five hours per month. Depending on your situation, you could easily spend more time to try and keep your business compliant with payroll tax requirements. If you cut down the time you had to spend on payroll administration, it would free you up to focus on other key projects that can help you grow your business (or even take a well-deserved break every now and then).

    Are You Afraid of Payroll Taxes?

    It’s important to spend time to make sure your payroll is managed correctly, as noncompliance can be costly. According to the Federal Register, the Department of Labor increased the penalties for payroll tax violations effective Jan. 13, 2017, making penalties even more expensive now than they were in the past. 

    When you aren’t a trained payroll professional, mistakes can happen even if you spend more time on payroll tax management. A miscalculation or missing piece of information is all it takes to incur a penalty. Payroll software allows you to easily keep track of deductions online without having to shuffle through old sheets of paper to determine if you did everything right.

    Is Your Business Growing?

    Even if you have a handle on your business’ payroll now, that may not be the case in the future. The more employees you add, the more work will be necessary to complete payroll. If you handle payroll offline, that means more storage space for documents, more potential for mistakes, and more strain on your schedule. 

    Just because your business grows doesn’t mean that your already-hefty workload needs to get bigger. Online payroll allows you to manage everything from any location as long as you have an internet connection. Thanks to the ability to complete payroll in a fraction of the time, you can add more employees without worrying nearly as much about how much longer it’ll take you to handle payroll administration each month.

    Online Payroll for Small Businesses

    Small business owners wear many hats, but you don’t have to be on your own when it comes to payroll management. Outsourcing payroll administration to a Professional Employer Organization allows you to lessen your workload while gaining the benefits of online payroll services. Not only does this mean you can make the move to online payroll, but you also have access to a dedicated payroll specialist who can provide you with help when you need it.

    Considering investing in online payroll software? Contact GMS today to talk to one of our experts about how payroll software can help you and your business.

  • As a small business owner, you’ve likely thought of ways that you can cut business expenses to save money. One of these ideas may involve whether you should invest in outsourcing HR or hiring in-house HR professionals.

    HR just isn’t that important when you don’t have many employees, right?

    Wrong. Every business needs to deal with critical HR functions, whether it’s a major corporation or a five-person business. Here’s what you need to consider the next time you think about whether your business needs HR management.

    Employees at a small business thEmployees at a small business that outsources HR management.at outsources HR management.

    HR Needs for Small Businesses

    Payroll

    If you have employees, you’re going to deal with payroll. While you can manage payroll on your own, simple mistakes can get pricey. Inc. reports that “the IRS penalizes about one out of every three business owners for payroll errors,” with penalties costing small businesses up to $4.5 billion per year according to Bloomberg.

    Compliance is likely not your only concern when it comes to payroll. More than half of small business owners spend at least three hours a month managing payroll. Investing in HR can give you the time you need to focus on other key business items instead of struggling with payroll management.

    Hiring and Firing

    While you have a smaller staff, every hiring decision is crucial. SHRM found that the average cost per hire is around $4,129, which makes every bad hire a costly mistake. 

    An HR function like employee recruiting and training can help you find the right people for your business and better prepare them for their roles, lowering the chances of a bad recruit. HR can also handle employee performance management. This involves not only keeping employee policies up to speed, but also handling everything involved with employee termination, such as legal regulations and internal procedures.

    Risk Management

    One crucial aspect of good HR is that it can help you deal with costs that you may think can’t be managed. Let’s say that you had to fire an employee. That employee could make an unemployment claim. Another worker may get injured on the job and try to argue that your workplace was unsafe. These scenarios could end up being very costly for a small business without the right compliance documents and risk management strategies.

    HR professionals can take actions to protect your business. Managing key documents like employee handbooks and keeping track of performance records can be the evidence you need to fight off future claims. A good HR partner can also help lower standard workers’ compensation rates and unemployment taxes through detailed record-keeping and management, offering you some savings in places you wouldn’t have expected to be possible.

    Benefits

    You don’t have to be a big employer to offer group health insurance and other attractive benefits. While businesses with fewer than 50 full-time employees don’t have to offer health insurance, 95 percent of HR professionals cite health care benefits as a top benefit for employees, making an intriguing benefits package a great way to attract and retain top talent.

    Of course, offering these benefits can be expensive and time-consuming without expert help. An employee benefits administration team can help you identify exactly what benefits your employees want, keeping you from wading into a pool of healthcare compliance and helping you offer an attractive package that won’t break the bank.

    Find the Right HR Option for Your Small Business

    A small business has a lot to gain from quality HR management. A good HR partner can handle everything from complicated tax compliance concerns to helping you understand which employee documents you need to keep on file, but that doesn’t mean you need to hire a whole staff in the process. The key is to find an HR solution that fits what you need and can grow along with your business. 

    A Professional Employer Organization (PEO) allows small businesses to find an HR management solution that suits them. A PEO gives you access to HR professionals who can manage your payroll, benefits, and any other key HR functions, saving you time and ensuring that your business is covered in the process. Contact GMS today to talk to one of our experts about how we can help your business.

  • Who doesn’t love payday? For many employees, payday makes them feel better than Christmas. As a small business owner, you have the freedom to decide how to handle payroll at your organization. Talk about a huge responsibility. It’s important to get it right, as payroll done wrong can cost a small business owner time and money. 

    There are a few different methods for distributing employee pay, but savvy business owners find that electronic payroll methods like direct deposit and payroll cards streamline the process and keep employees satisfied. We explored the different types of payment methods to help you determine the best payroll solution for your business.

     Small business owner determining employee pay.

    Direct Deposit

    Direct deposit lets you put your employees’ wages directly into their checking or savings account. Because everything is handled digitally, employees don’t need to be present to receive their pay. The convenience of direct deposit for both employers and employees has made it the most common payment method in the U.S., with 82 percent of employees receiving their pay this way, according to a survey by the National Automated Clearing House Association (NACHA). 

    Direct deposit can help save time since you don’t have to fill out and distribute checks each pay period. Online payroll software can further help streamline this process and save money. With software, payroll simply needs to be reviewed before submitting it to be deposited in your employees’ bank accounts. Without software, small business owners are responsible for paying fees for setup and for every transaction.

    For direct deposit, you’ll need to gather your employees’ banking information at the time of hire. Of course, it only works if employees have bank accounts. According to the Federal Deposit Insurance Corporation (FDIC), nearly 20 percent of American households are “underbanked,” meaning they either don’t have or actively use a bank account. If you choose direct deposit as your primary payment method, you’ll need to provide an alternative option for those who don’t bank.

    Payroll Card

    Payroll cards are another form of electronic payment that lets you automatically load an employee’s wages directly onto a prepaid card at each pay period. Employees can then either use the card directly to make purchases or withdraw cash at ATMs.

    With payroll cards, employees don’t need to have a banking account, making it a viable alternative to direct deposit. It also helps save businesses time and money compared to writing or printing paychecks. The benefits for both employers and employees are why payroll cards have become a growing trend, with the use of payroll cards expected to increase by about 43 percent by 2022, according to a study by Aite Group.

    Other Types of Payment Methods

    Paychecks and cash are two outdated forms of payment methods that simply aren’t worth the hassle or added costs. For employers, writing or printing paychecks can be an extremely time-consuming task, especially depending on the frequency of your payroll. 

    Additionally, you’ll have to factor in the cost of purchasing blank checks, and/or printing supplies like check stock, ink, and a printer that has the capability to print with magnetic ink to read, process, and print bank account and routing numbers on the checks.  Switching to paperless can cut these costs. A report in Business News Daily states that “businesses save between $2.87 and $3.15 per pay run by paying employees electronically, such as via direct deposit, instead of via paper check.” The report also points out that online pay stubs save an additional $1.20.

    The amount of recordkeeping that comes with paying in cash can also be a nightmare for small businesses. Cash payments could make the IRS suspicious that you aren’t taking out the correct tax amounts, making you susceptible to an audit. Even if you are in compliance, IRS audits cost significant time and money.

    For both methods, employees need to be present in order to receive pay, which could be a problem if employees are out sick or on vacation. According to CareerBuilder, nearly 80 percent of Americans live paycheck to paycheck, so a delay in pay could really hurt your employees financially.

    Save Time Through Payroll Services

    While we’re thankful electronic payment methods have replaced checks and cash, managing payroll and tax filings can still be a time-consuming and challenging task for small business owners. 

    Need assistance? Outsourcing payroll administration to a professional employer organization (PEO) like Group Management Services (GMS) can help save you time and give you peace of mind. From electronic payroll processing to software to taxes, GMS takes an active approach managing payroll, so you can spend the extra, time, money, and energy growing your business. In addition to payroll services, GMS offers a full suite of HR services that compliment payroll administration, including human resources, risk management, employee benefits, and more.

    Contact GMS today to see how we can help manage payroll at your organization.

  • Running a business comes with more responsibility than most people realize. The administrative requirements to stay compliant while growing a successful business can overwhelm most. Some business owners will hire office managers, an HR generalist, interns, etc., but some completely put off the HR needs of their company. This can cause major issues down the line with compliance issues, payroll dilemmas, job description disputes, and the list goes on.

    The Professional Employer Organization (PEO) industry exists to help business owners outsource their back-office functions to focus on the real reason they developed their company, which is to generate revenue. 

    A happy small business owner who outsources key business functions to a PEO. 

    Five Indicators That it Might be Time to Partner with a PEO

    The administrative functions of running your business have become overwhelming

    If you’re trying to find more hours in the day for you and your staff, using a PEO may be a good way for you to free up time. Many growing businesses find it hard to maintain efficient administrative processes as they expand. GMS can help streamline the payroll process, handle compliance issues, assist with employee recruitment, provide salary analysis, and much more.

    You aren’t 100 percent confident that your business is compliant with State and Federal regulations

    Face it, the business of being a business owner has become more and more complicated with rising costs and liabilities of having employees. Just through the Affordable Care Act alone, there have been about 900 new regulations enacted in recent years. Are you aware of all the changes? GMS provides the HR expertise with a designated and certified account manager attached to an HRIS platform to ensure compliance with all federal and state employment regulations.

    You lack the financial resources to develop a full HR department

    Building an HR department can be time-consuming and expensive. The median salary for a Human Resource Manager is $110,112 per the Bureau of Labor Statistics. Depending on the need, an in-house department can involve hiring an HR Director, using a payroll company, securing an EPLI policy, paying a 401(k) audit fee, and paying attorney fees, all of which can add up quickly. GMS can often provide a broad array of services and qualified experts without having to hire internally.

    You want to focus more on the growth of your business

    Outsourcing the daily administrative aspects of running your business frees you up to focus your attention on growing your business. You retain full control over decision-making, employee responsibilities, core job functions and requirements, hiring decisions, and the structure of your organization. While GMS can offer input in these areas, you remain in control of all final decisions. This is the foundation of the co-employment relationship that GMS creates with its clients.

    You’re in a high-risk industry

    Small businesses can be paralyzed by compliance requirements with labor laws, tax reporting, and workers’ compensation insurance. The list of acronyms – like FSLA, FMLA, EEOC, HIPPA, PPACA, FUTA, and SUTA – are enough to cover the entire alphabet while overwhelming any business owner. If you have employees, you must provide them with workers’ compensation insurance that will pay wages and medical expenses in the event of hours lost because of workplace injuries. By partnering with a PEO, you can rest assured that your business and your employees are protected.

    Ease Your Workload and Strengthen Your Business at the Same Time with a PEO 

    Businesses are created from a passion, and that passion doesn’t usually include handling all the administrative functions required to keep your business running. GMS takes those burdens off the business owner, so they can focus on the core functions of their business. Contact us today to see how we can make your business simpler, safer, and stronger!

  • Whether you’re trying to find a way to save time and energy by outsourcing payroll administration or your old payroll partner just isn’t cutting it, you’re going to have to deal with the process of switching to a new payroll system, also known as payroll conversion. A rough transition to a new payroll system can lead to serious issues, including IRS penalties for non-compliance. Fortunately, there are some ways to help alleviate some potential issues that can arise when you convert your payroll process to a new system.

    A small business owner going going through the payroll conversion process with a PEO. 

    Conversion Timing

    Once you’ve decided that it’s time to switch to a new payroll provider, it’s important to consider when you want to start the process. Planning a conversion at a certain point in the year can help simplify the conversion process. 

    Typically, the end of the calendar year is one of the best times to undergo payroll conversion as it allows you to start the new system off fresh regarding balances. You can also convert payroll at the end of a quarter, but you’ll have to enter historical data like employee earnings, taxes, and deductions based on the time of the year. If you decide to convert in the middle of a quarter, you’ll have to make sure everything matches up on the exact dates, which can leave you open to a greater potential for errors and a longer conversion process. 

    Data Transfer and Verification

    No matter when you decide to undergo payroll conversion, you’re going to need to transfer a lot of data to your new payroll company. A good payroll partner will have a set list of information you need to provide and how it should be delivered. Some companies may ask you to manually enter data yourself, but others will simply ask you to provide your information physically or electronically and they will transfer it to the new system for you. 

    Depending on the company, they may even tailor your setup checklist to your company or the payroll company you worked with previously to simplify the process. In general, the more your new payroll company takes off your hands, the easier the conversion process will be on your end.

    Once the information is in the system, it’s important to ensure that everything is set up properly and that all the data provided is correct. A new payroll company can test the accuracy of both the system and the data by running your old system at the same time as your new system to cross-reference key details so that everything runs as it should once you’re completely switched over to your new payroll process.

    Payroll Tax Management

    There are many different functions of payroll management, and handling payroll taxes is an extremely important one. One third of small businesses spend at least 40 hours per year managing payroll taxes, so you want to make sure that your new payroll partner has a payroll process that doesn’t complicate payroll tax management and reporting. 

    When you’re ready to switch to a new payroll partner, ask about how potential vendors update tax table information and convenient options for sharing information so that you aren’t left in the dark when it’s time to manage payroll through your new payroll system. In fact, you may find that some payroll partners can take on some of the responsibilities and liabilities involved with payroll taxes. This not only can help simplify the payroll conversion process by lowering the number of tasks you need to manage, it can save you time and energy for years to come.

    Customer Support

    Your new payroll partner is there to make your life easier, so don’t be afraid to ask questions and find out just what level of support they offer. These questions include:

    • Do you have any relevant clients that I can call for a reference?
    • Will I have a consistent contact during the payroll conversion process?
    • What hours is customer support available and how are they available?
    • Do you provide a checklist or timeline for what happens during the transition and who is responsible for these tasks?
    • How much do you help with payroll compliance issues?
    • Will you keep me up to date with any new payroll laws or changes to current regulations?
    • How will my employees access their payroll information and documents?

    If a potential payroll partner appears to dodge your questions, that could be a sign that they aren’t the right fit for your business. Instead, they should provide clarity as to how they’ll simplify the conversion process, which should include assigning you a dedicated point person and a detailed setup checklist. This list should clearly lay out the payroll conversion process, including meetings, system training, and other demos to make sure that you know how to work with the new system and avoid any early hiccups during the transition.

    The Advantages of Payroll Management Through GMS

    At GMS, we know that the process of switching to a new payroll partner and online payroll software can be stressful. That’s why any new GMS client is assigned a dedicated coordinator who will help guide you through the payroll conversion process, which includes gathering necessary documentation, entering data into the system, and communicating key details to ensure a smooth transition to GMS.  

    While some companies solely handle payroll, payroll administration is just one of many vital HR services that GMS offers. We provide comprehensive HR solutions for small business owners, including benefits administration, risk management, and other functions. As your business grows, your time becomes an increasingly valuable commodity. We help you reclaim that time to focus on building your business while strengthening your company through expert HR management.

    Ready to make the switch to a new HR partner? Contact GMS today to talk to one of our experts about payroll administration and other key HR functions.

  • Payroll management is no simple task. Regardless of whether your workforce is 50 strong or you can count the number of employees on two hands, there are lots of employees and documents to keep track of and failure to do so could result in serious penalties and fines. To help, we’ve put together a guide for better managing payroll records.

    Payroll records. 

    What Payroll Records to Keep and For How Long

    Payroll records are documents and items related to paying your employees. Similar to how a candidate’s job applications and interview records need to be kept for one year, the U.S. Department of Labor (DOL) Wage and Hour Division and Internal Revenue Service (IRS) require employers to keep payroll documents for a set amount of time. Here are the payroll records you need to keep in your files:

    Hiring documents

    Hiring documentation like an offer letter include DOL-required employee data, such as their residential address, job title, and pay rate.

    Keep for three years.

    I-9 documents

    These include information about an employee’s eligibility to work in the U.S. and DOL-required information like the employee’s full name and Social Security number.

    Keep for three years.

    Time cards

    Time cards show total hours worked, including unpaid lunch breaks and overtime pay.

    Keep for three years.

    Paystubs

    These will show payment dates and the total wages each period. Paystubs will also include any additions (like reimbursement) or deductions (like taxes and benefits) to wages.

    Keep for four years.

    Employee handbook

    Every employee should have signed your employee handbook. Employee handbooks provide information on how your employees are paid (hourly or salary) and how often you pay employees (weekly, biweekly, monthly). It also describes information regarding paid holidays, termination, and severance.

    Keep for three years.

    Compensation philosophy

    A compensation philosophy shows how you determine employee pay grades. You’ll also need to show rationale for pay increases or merit increases, as required by the Equal Employment Opportunity Commission (EEOC).

    Keep for two years.

    Tax forms

    The IRS requires employee and employer tax documents, including W-4s (employees’ withholding allowance certificates) and W-2s or W-3s (employee’s wage and tax statements). 

    You’ll also need to keep payroll tax payments, which can be found on Forms 941 (employer’s quarterly tax form, which also includes information on tipped wages) and 940 (employer’s annual federal unemployment tax return).

    Keep for four years.

    Retirement income

    Retirement income statements show 401k or profit-sharing plan details as required by the Employee Retirement Income Security Act (ERISA). You’ll also need to keep documents outlining enrollment, payment, and payroll deduction.

    Keep for six years.

    Leave documentation

    The Family Medical Leave Act (FMLA) requires payroll records regarding your leave policy, requests for leave, leave balances, and leave payments. This information is typically found in your employee handbook or on employee paystubs.

    Keep for three years.

    Termination information

    A termination letter outlines an employee’s end date and any final payments, such as unused paid time off or severance.

    Keep for three years.

    Keep in mind that anytime you have a dispute relating to payment or employment with an employee, it’s best practice to keep all payroll records until the dispute has been resolved.

    State-Specific Payroll Records Retention

    Most states abide by the payroll records retention guidelines provided by the U.S. Department of Labor and IRS, as detailed above. However, a few states have further legislation that affects what payroll records to keep and for how long. These include the following exceptions:

    • New York requires payroll records to be kept for six years.
    • California requires that all payroll records be retained for six years.
    • Illinois requires employers to keep all payroll records for five years.
    • Washington has more specific requirements of what payroll records to retain.

    Destroying Payroll Records

    Keep in mind that holding onto payroll records for longer than required can put business owners at risk. Financial and personal information related to payroll, such as bank account information, credit reports, and photocopies of social security cards, should be destroyed after the retention time frame to prevent confidential data from being misused. In case any questions about destroyed documents arise, you’ll also want to keep track of which payroll records you’ve destroyed and when.

    How to Store Payroll Records

    As you can see, there are lots of payroll records to manage. Business owners will need a good filing system to keep track of these documents. 

    Think twice before storing paper records in filing cabinets or boxes. Often, these records are forgotten about and kept for longer than needed. It’s also time-consuming to manually file each document and can be even more tiresome should you need to refer back to certain records. Security can also be an issue, as these filing systems are often easily accessible.

    Rather, savvy business owners have found that it’s much more efficient to digitally store these important documents in a payroll management system. This ensures that records are securely stored and can be readily available from anywhere there’s an internet connection. Additional online payroll software benefits include:

    • Payroll processing. Ensure employees are paid on time every pay period and electronically store information regarding paystubs, payroll deductions and time tracking.
    • Payroll tax. Streamline filing and ongoing maintenance of tax records.
    • Employee self-service. Give employees 24/7 access to their payroll and tax information.

    Outsource Payroll Records Management

    When it comes to payroll records, there’s a lot of information to process—mentally and literally. Outsourcing payroll records management through a professional employer organization (PEO) like Group Management Services can help business owners save time and worry. We take on the burden of payroll records management, so you can put your focus back on client relationships, building and effective team, and growing your profits. In addition, GMS provides human resources, risk management, employee benefits services to help make your business simpler, safer, and stronger.

    Stop wasting time on payroll records management. Contact us today to talk to one of our experts about our payroll services.

  • As an employer, understanding how to calculate payroll tax and income tax deductions is essential to running a compliant and efficient business.. A major part of that is making sure every employee’s paycheck has the correct taxes and other deductions withheld. Below is an overview of some of the most important payroll deductions for 2025, along with pointers on how to calculate them.

    Calculating Payroll Taxes for Employees

    The term payroll tax typically refer to Federal Insurance Contributions Act (FICA) taxes, which include both Social Security and Medicare contributions. For 2025, the employee-share rates remain:  

    • Social Security: 6.2% of gross wages
    • Medicare: 1.45% of gross wages

    This totals 7.65% for most employees, withheld each pay period. For example, if someone’s gross pay is $1,000:

    • Social Security withheld = $1,000 x 6.2% = $62
    • Medicare withheld = $1,000 x 1.45% = $14.50
    • Total Payroll Tax withheld = $76.50

    Meaning every paycheck for that employee will have $76.50 withheld.

    How to Calculate Federal Income Tax Deductions

    Unlike the flat rates for Social Security and Medicare, income tax deductions are determined by the employee’s Form W-4 and IRS tax tables. The IRS has 2025 Form W-4 instructions and updated tables in Publication 15-T. You can generally calculate withholding using either the wage bracket method or the percentage method.

    Wage bracket method

    This method uses easy-to-read tables. You simply:

    1. Look up how frequently you pay employees (weekly, biweekly, semimonthly, monthly, etc.).
    2. Choose the correct table based on the employee’s filing status (from the Form W-4) and whether they’ve checked the Step 2 box.
    3. Find the wage range in the table; the table cross-references the amount of tax to withhold based on any additional adjustments entered on the W-4.

    Percentage method

    This approach involves a bit more math, but it may be more flexible if your payroll amounts frequently exceed the ranges in the wage bracket tables. You will:

    1. Convert allowances (if you still have employees on 2019 or earlier W-4s) or interpret the relevant steps if they’re using a 2020 or later W-4. (For 2019/pre-2020 forms, note that the IRS publishes a “computational bridge.”)
    2. Subtract any allowances (or standard W-4 adjustments) from gross wages to get the taxable portion for that pay period.
    3. Apply the percentage method table.
    4. Add or subtract any additional amounts indicated on the employee’s W-4.

    Understanding State and Local Payroll Tax Withholding

    State And Local Taxes

    Federal income taxes aren’t the only concerns; many states and local governments require payroll tax withholding for state and local income tax deductions.. The method differs from state to state:

    • Some states (e.g., Florida, Texas) do not impose state income tax, meaning you only handle federal deductions.
    • Others (e.g., Ohio, New York) require both state and sometimes local income tax withholdings.
    • Check your state government’s website or official documentation for the 2025 rates and instructions.

    Additional (Voluntary) Paycheck Deductions

    In addition to required taxes, some income tax deductions are voluntary and may be either pre-tax (which reduce taxable income) or post-tax: These can include:

    1. Health insurance premiums for medical, dental, vision, etc.
    2. Retirement contributions (e.g., 401(k), IRA) chosen by the employee.
    3. Life insurance premiums paid via payroll deduction.
    4. Job-related expenses if you have agreed to recoup certain business expenses through paychecks (where legal).

    Ensure that these are set up correctly in your payroll system. Some might be pre-tax (reducing taxable wages), while others are post-tax.

    Why Payroll Tax Compliance Matters

    Staying accurate and up to date on payroll laws and tax tables is vital. Miscalculating payroll tax or income tax deductions can result in underpayment or overpayment, leading to potential penalties from the IRS or your state’s tax authority. It also impacts employees directly; over-withholding means smaller paychecks, while under-withholding can mean a big tax bill in April.

    • You’re responsible for timely depositing withheld taxes with the IRS, as well as filing the proper forms (like Forms 941 or 944 for federal payroll taxes).
    • For 2025, be sure you’re referencing the latest versions of IRS Publication 15 (Circular E) and Publication 15-T (2025) for the updated wage bracket or percentage method tables.

    Let GMS Simplify Your Payroll Tax Process

    Handling small business payroll taxes can be daunting, especially as forms and laws evolve each year. Group Management Services (GMS) can take the guesswork out of payroll tax and income tax deductions, ensuring accurate withholdings, filings, and tax deposits. If you’re:

    • Worried about maintaining compliance for 2025.
    • Unsure how to handle different forms (e.g., older 2019 W-4 forms vs. new 2025 W-4 forms).
    • Concerned about multi-state or local tax withholding.

    Group Management Services (GMS) can help streamline all aspects of your payroll tax management, from accurate withholdings to timely tax filings, allowing you to focus on growing your business. Contact GMS to learn more about our payroll tax services and how we can help you navigate the complexities of income tax deductions.