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The Important Benefits of Pass-Through Payroll Services

Posted by Jeff Pelliccio on Sep 12, 2012 8:39:00 AM

In ICS insights

In the current economic climate, employers are increasingly hiring temporary and contract workers. While this provides employers with flexibility, it also introduces other issues, which, if not handled properly, put the company at risk. In order to ensure compliance and protect themselves from liability, businesses are choosing to pay their contract workers through a third party pass-through service. Matthew  Walden, Senior Vice President, and John Silver, Executive Director of Infinity Consulting Services (ICS) explain the benefits of having a third party provide payroll services.

Q. What exactly does it mean to provide pass-through or payroll services?

Matt: We serve as the employer of record for temporary staff, contract labor, or per diem employees recruited by our clients. Each week, we pay thousands of individuals located throughout the United States and handle every aspect of the payroll process from electronic timekeeping to the delivery or direct deposit of paychecks.

John: Our  payrolling service also assumes all legal obligations for “payrolled” employee wages, payroll deductions, unemployment insurance, and workers’ compensation. This is particularly important because misclassification of employees has grown as a pain point for many companies in recent years.

Q. Why is misclassification such an issue?

John: The IRS recently revised its criteria for determining whether someone is an independent contractor or employee and simultaneously the use of temporary workers has skyrocketed. If one or more employees are misclassified as independent workers, a company could be facing violations from the IRS and the Department of Labor. Suddenly, they are confronted with substantial back taxes with interest, fines, and possibly a payment to cover back benefits.

Matt: An expense like that can cripple a company and, in some severe cases, the IRS has seized a business’s assets to ensure repayment. Unfortunately, frequently changing tax regulations increase the chances of audits and unintentional violations. Pass-through services ensure compliance with various state and federal agencies and mitigate risk.

Our Employer of Record payroll services are specifically designed to mitigate the risk of co-employment as well as employee misclassification. Learn more about how ICS can protect your business while saving you money.

Q. What are some other benefits of ICS pass-through services?

John: ICS eliminates all costs related to on-boarding staff and processing payrolls. We can also provide electronic time-keeping, consolidated electronic invoicing, and customized management reports reflecting payroll usage in any format. All of this makes it much easier for companies to manage consulting populations and track spend for their pass-through workers.

Matt: It also significantly reduces the cost of running your business by removing administrative issues and financial responsibility associated with Federal and State unemployment filings and Workers’ Compensation claims. Beyond shrinking a company’s operating costs and providing protection against co-employment issues, background verification, credit checks, and drug screening are available upon request.

Q. Do payrolling services benefit temporary and contract workers?

Matt: Absolutely, it’s not only companies who have to worry about compliance with IRS guidelines.

John: There was a 2006 internal report that self-employed people are the IRS’s number one target for tax evasion audits and independent contractors earning over $100,000 were five more times likely to be audited than corporations. As a payrollee, your taxes are automatically taken out, including Social Security and Medicare.

Matt: In addition to that, there is often the option of employer or employee group purchased benefits including major medical, dental, life, and long-term disability insurance as well as retirement plans, like a 401k. Those are all things independent contractors who are considered self-employed don’t have access to, unless they are paying out-of-pocket for individual plans, which is significantly more expensive.

John: That’s a good point. The possibility of group benefits can really make the difference when someone is deciding between two contract positions.

Q. Now that we have a little background, why should a company choose Infinity Consulting Solutions as its pass-through services provider?

John: As one of Inc. 5000’s Fastest Growing Companies in America for the past 6 years running, we understand and meet our clients’ needs by being proactive and maintaining a high touch partnership. Our professional yet personalized service is really what distinguishes Infinity CS.

Matt: Our flawless payroll performance history demonstrates not only our competence and expertise but also our commitment to integrity and honesty. We also take the time to get to know our clients in order to best serve their needs. One of my colleagues said we offer large company capability with small company service and I think that sums us up nicely.