As your company grows, some of your managers decide to start adding independent contractors to meet overwhelming workload. After a year you realize there are over a dozen independent contractors. Then the letter arrives in the mail. One of your contractors filed for unemployment insurance and triggers an audit by the California EDD. So after 12 hour work days, now you have to go through a time consuming audit. The EDD quickly determines that you should be paying all of your independent contractors as employees and assesses fines, interest and penalties. And now you have to figure out how to put all of your contractors on payroll and explain budgeting changes to your VC investors.
Payrolling, or Employer of Record as it is commonly known, can be a bit of a mystery for companies who haven’t used it before. So how do you know if you need a payrolling service? The first thing companies have to ask themselves is “what do we do”? Unless your company provides payroll services, then processing payroll is not the answer to that question. If managing your contingent workforce (contractors, temporary employees, etc.) distracts you from the answer to “what do we do?”, then a payrolling service could be right for you. With the recent California Supreme Court Ruling in Dynamex Operations West v Superior Court of Los Angeles, the amount of risk and complexity associated independent contractors has increased dramatically. A payrolling service takes care of compliance, workers’ compensation, taxes, payroll processing, and human resources issues. It’s hard enough to be successful in a competitive environment with no distractions. The more resources that get siphoned from your core business, the harder it becomes to meet your business plan goals.