Starting a small business is all about exploration and a bit of trial and error. So, as a new business owner, you try to do as much as you can on your own, including your payroll. However, while handing the task on your own might seem more cost-effective and even easier, there are all sorts of mistakes you can make. Learn the true cost of DIY payroll for your small business. 

Employee Classification

Each person that performs services for your company is not an employee. Workers typically fall into one of two categories: employee or independent contractor. If you incorrectly classify a worker, you can create issues for yourself and the individual. Keep in mind, if the employee faces any penalty because of your mistake, such as denied benefits,  you could be held liable. 

For example, there are different tax requirements for employees and independent contractors. Additionally, if you don't classify your workers correctly, you could incorrectly classify your business, which you could affect the tax liability for your business.


As an employer, you are responsible for your employees' taxes — there is no exception. First, it's your responsibility to calculate the exact amount of taxes that you must deduct from your employee's pay based on their exemptions, including federal, state, and local taxes. 

Similar to classification issues, if you make a mistake, you are liable. Second, you are also required to make the tax payments in a timely manner. If you are unaware of these requirements, you could amass a large number of costly penalties. 

Pay Calculations

Your employees likely enjoy working for you; however, they care about their pay as well. At the end of their pay period, they want to receive every cent they worked for. Many people are often surprised to find that paying employees is more than just calculating their hours; you also have to consider their overtime hours, breaks, and even paid vacation. 

When you don't pay an employee correctly, it's more than just a simple mistake. In some places, a pay issue is a potential violation of the law. When you handle payroll on your own not only do you have to figure these amounts correctly, but you also have to ensure you get payments out on time. 

Save the business money and yourself a great deal of stress. Don't try to handle your payroll needs on your own. Trust a payroll specialist to handle all your company's payroll needs. Reach out to a place like cadj pro for more information.