Employer Payroll and Benefit Practices
Information for State Agencies on Employer Practices
There is a wide range of options from which employers may choose to handle payroll processing and benefits administration for their employees. Some options provide more control, while others are more cost-effective.
Employers configure their payroll process by determining who will perform certain payroll functions. Some examples of payroll configurations are:
- All payroll functions are handled in-house by an internal payroll department.
- Some or all payroll functions are handled by a "payroll service provider," an outside company with whom the employer has a contract for services.
Child support withholding may be calculated in-house by an employer even when a payroll service provider runs the payroll. Many of the larger payroll service providers offer child support withholding services; some offer medical support processing as well.
Payroll Software Considerations
Most payroll processing is now computerized, and some type of payroll processing software is used to process what was once a manual function. Each software package offers different features, and not all software includes child support payment features.
Employee Benefit Programs
Employers have options available for handling employee benefit programs:
- An employer may administer health insurance coverage for its employees through an outside Benefits Plan Administrator.
- Health insurance administration may be handled internally.
Professional Employer Organizations
An emerging option for many employers involves outsourcing of both payroll services and employee benefit programs.
Professional Employer Organizations (PEOs) are companies that provide the entire range of services to employers, including payroll, payroll tax compliance, garnishments, personnel management, health benefits, workers' compensation claims, and unemployment insurance claims. Employers may contract with a PEO to provide any or all of these responsibilities.