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Web-based Payroll Pays Off
The Web enables businesses to access payroll anytime, anywhere.
By Antoinette Alexander
When Rey Monzon started developing Virtual Payroll, an Internet payroll service, back in 1995, his plan to provide payroll services via the Web seemed absurd to some. In fact, he was once told the Internet was a chat room for 14-year-olds, not a place for confidential information like payroll.
But times have changed. Today, not only is the Internet a valued resource for news, investments, global communication, and shopping, but also for a myriad of online services, including payroll processing.
Online payroll providers are emerging at a torrid pace and many veteran payroll processors, like ADP, are migrating to the Web, enabling businesses to enter data from remote locations any time of the day. Often the online services are cheaper than traditional payroll processing, providing small businesses with services once available only to larger companies with larger budgets. And, as is the case with most Web-based services, since the system is online, there's no need for users to purchase and install software. For many of the Web-based systems, users need only Internet access and a browser.
"If they have found my Web site, they have all they need for my system," says Monzon, president of Margate, Fla.-based Virtual Payroll. The site, located at www.virtualpayroll.com, went live three years ago and has since attracted more than 500 users, most of which are small or home office businesses. Services include direct deposit of employee paychecks; electronic tax filing of federal 941 deposits; downloadable and printable employee earnings statements and pay stubs; preparation of all state and federal quarterly and annual payroll tax returns; the ability to download and print payroll, management, and payroll tax reports; and automatic filing of all quarterly and annual federal and state payroll tax returns. There is a base charge per payroll of $16.95, plus $1 per employee. For example, for a 50-employee company, it would cost $66.95 per payroll.
Patrick Lacy, of Atlantic Pacific, a business insurance agency in Palm Beach Gardens, Fla., has been a Virtual Payroll client for nearly two years and says online payroll is the only to way to fly.
"It has been very good. It has taken about a four or five hour process and made it 20 minutes," says Lacy, the agency manager. Lacy says the online service not only saves him time, but also about $300 a month. For 30 employees paid biweekly, Lacy pays about $40 per pay period using Virtual Payroll.
Lacy does point out that with Web-based payroll, "There is some control missing that I would like." For example, Lacy says he must correlate employee bonuses with pay periods, otherwise he would have to set up a separate account.
Monzon, who has dubbed Virtual Payroll as a pioneer in providing Web-based payroll processing, says many other Web-based payroll processors have copied his business model and, as a result, he is trying to patent browser-based Internet payroll, which means competitors would have to pay him royalties. He says a decision could be reached by the end of the summer. "I'm anticipating that it should shake up the industry," he says.
But in the meantime, national payroll processors like Automatic Data Processing, Ceridian, and Paychex are designing Web-based systems as well.
Earlier this year, Roseland, N.J.-based Automatic Data Processing (ADP) launched EasyPayNet, an Internet solution for payroll processing, payroll tax filing, and benefits administration. EasyPayNet users can review and revise payroll information on their time, create management reports instantly, and submit payroll information to ADP via the Internet. The Web system, in beta testing for the last year, has more than 100 users, says Brad Smith, vice president and general manager of ADP's e-business services division serving small businesses. Users need only a browser and Internet access.
"What we've designed is an application that has a tab folder format, online wizards, and employee list box," says Smith. "While you still have control over the input of data, the rest we handle."
Currently 75 percent of small businesses phone-in their payroll data. Smith estimates that within the next three years, 69 percent of small businesses will process payroll data via a PC or the Internet.
Ceridian is targeting small businesses with its Internet payroll service, PowerPay.com, which was released a year ago. The system requires only a browser and Internet access (56K or higher is recommended). Users can do same-day payroll processing, reporting and tax filing; background checks and drug screening; retirement plan administration; and optional employee benefits programs available through payroll deductions.
"The number one drive for small businesses was the fact that they are in control of the payroll at anytime," says Brian Regan, president of Pine Brook, N.J.-based PowerPay.com. "They can even do (payroll) from home."
Regan says they have about 1,000 users, which are companies ranging from nursing homes to high-tech companies. Prices range, but a company could spend between $2 and $2.50 per check, which includes delivery, tax filing, and direct deposit, he adds.
Paychex is expanding its Internet-based service capabilities and plans to announce the enhancements later this year. Paychex's remote-entry system, Paylink, enables clients to enter payroll data, add and change employee information, and produce reports via a modem at any time. In addition, the Rochester, N.Y.-based company offers its Internet Report Service (available at www.paychex.com), which allows users to receive payroll reports such as Benefit Time Report and Direct Deposit Report, via the Internet, says Gene Polisseni, senior vice president of marketing.
There is no additional set-up fee or per-payroll charge associated with the Internet Report Service. Online reports are available from the past 4 months free of charge. Reports 5 to 48 months old are archived, and there is a $2 charge for each archived report viewed or printed by the client.
About six months ago, Oklahoma City-based Paycom launched a Web version of its proprietary payroll software, also named Paycom. The Internet version, called Paycom Online, allows businesses to enter payroll data, change employee information, print reports, and download files via a browser. The system processes and calculates the information automatically. Taxes are deposited electronically and the reports are printed online. The system targets businesses of all sizes, but is ideal for companies with less than 200 employees, says Chad Richison, vice president of sales.
Prices vary, but Richison says for ten employees, paid every two weeks, the cost would be roughly $30 per payroll for everything, including electronic tax payments and direct deposit.
Another entrant, Oak Brook, Ill.-based Related Payroll Services (RPS), has started testing its Internet payroll product designed for small to mid-size businesses. A release date is expected sometime this summer. The service, which will be hosted by ASP-One, is currently known as WebCalc, but the official product name has yet to be determined. The Web-based payroll product offers clients access to payroll processing, tax filing, direct deposit, and custom reports. Pricing has yet to be determined.
Payroll is a process that is still a source of dissatisfaction for many companies.
When Barry Star was a small business owner in Boston, he soon found himself frustrated with payroll, bookkeeping, and banks. So in 1998, Star launched OneCore.com, a broker/dealer of financial services for small to mid-size businesses.
"I had no idea what a raw nerve I hit," says Star, chairman and founder of Bedford, Mass.-based OneCore, who says business is growing 30 to 40 percent a month. "In the small business market, what is important is customer service."
Clients, who need only Internet access and a browser, set up a OneCore account, which is a money market account that has check-writing privileges, and choose from a suite of financial services including bill payment, 401K, merchant card processing, and payroll processing. Every OneCore service operates from this single account.
OneCore's payroll services, administered by payroll service provider and Intuit subsidiary Computing Resources of Reno, Nev., provides clients with full-service payroll processing including tax reporting and W-2 generation. Users enter the hours, the dates, and any changes from their computer. Within three days clients receive checks, check stubs for those using direct deposit, and the payroll report. And "because the payroll is tied to the OneCore account, it will notify you if you have insufficient funds," adds Star.
Taking a slightly different route is Reston, Va.-based Best Software, which is releasing its CustomHRMS, a hosted version of the Best Imperativ HRMS product, sometime this month. For the initial release of the product, Best will not be offering service-bureau processing, but plans to do so later this year, says Mary Hodson, general manager and vice president of the application hosting division. It will be the first time Best has offered processing services. Previously, it has concentrated on selling software for companies' internal use.
CustomHRMS enables both employees and employers to request time off, provide access to compensation and other employee data, develop position-based organizational structures, track career path management and talent development, view earnings history, create point-in-time information reporting, and view and edit personal information via a Web browser.
"Payroll applications and being able to view everything online and make changes online is a key piece to this," says Hodson. "If (users) want to make changes, they can do it at home."
Best Software has signed an agreement with Qwest Communications to host CustomHRMS at its data center. And, for users, there is no software to install, update, or maintain. CustomHRMS targets mid-size businesses, generally those with 1,000 to 2,000 employees, adds Hodson. The cost will vary depending on the amount of customization, but the average price is about $10 per employee per month. There will be an additional fee for service-bureau processing when the service is made available.
From Disk to Web
Vendors of payroll software are slowly making their way to the Web, although not at the feverish pace of some payroll processors. One example is Intuit, which is reaching out to small businesses with its remote-entry system, QuickBooks Deluxe. The product, which costs about $360 a year for five employees paid every two weeks, has attracted about 12,000 subscribers. QuickBooks Deluxe was released in September 1998.
"We know small business owners want to manage their business and a lot of the time payroll doesn't come first," says Lynn Favor, senior product manager for the employer services group. "(Now) they can do payroll on their time."
Users enter their payroll data into QuickBooks (or QuickBooks Pro) and transmit it to Intuit via the Web (Internet Service Provider required). Intuit processes the information, files the taxes, and/or completes direct deposits. Employee paychecks or direct-deposit receipts can be printed locally from within QuickBooks.
The company would not discuss in detail whether a Web-based product is in development, but Rich Walker, director of professional accountants marketing channel, did say that "Intuit's vision is one where all products and services are connected online and that can include payroll."
Murray Whipps of Phoenix Phive, whose primary customers are CPA firms that process payroll for their clients, says a Web-enabled product is "still in the design stages." Whipps, the company president, says it plans on developing an online mailbox of sorts where businesses send payroll information via the Internet and the data can be stored in the online mailbox for the CPA to pick up and process. Whipps says he hopes to roll out the product within a year. Phoenix Phive is the developer of Industrial Strength Payroll for Windows.
"We are trying to do things so (firms) will profit and grow their business," says Whipps. "We didn't want to compete with our customers."
Moorestown, N.J.-based Payroll Associates, developer of Paychoice payroll software, hopes to release a Web-enabled product in the third quarter, says president Steve Morrison. For the past year, the company has been testing the waters of the Internet with its Virtual Branch, which is geared toward multi-location service bureaus.
"The biggest demand over the past year is for the Virtual Branch," says Morrison, who adds that about five service bureaus are using the technology. "It is a unique solution for those that have multi locations and are trying to find ways to have access (to other offices)."
The service allows a remote payroll center to be connected to the main payroll center via the Internet, which offers benefits such as remote training and centralization of responsibilities like direct deposit and billing.
Copyright © 2001. This content is the property of Accountants Media Group - Thomson Corporation
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