Managing Employees and HR

Tell Me About Yourself

SBOCTeam — Thu, 19 Feb 2009 14:29:00 GMT

Great interview questions that get to the heart of a job candidate's capabilities

By Reed Richardson

Be prepared
You would never run right from a conference call into a job interview if you were trying to get hired, so you shouldn't engage in the same, careless behavior if you're going to be the one doing the hiring. Instead, spend at least 15 to 30 minutes before an interview going over a job candidate's resume so you can prepare some intelligent questions specific to their background and experience. After all, if you're really interested in hiring this person, you don't want them walking away from the interview thinking that you and your company are so disorganized that they don't take hiring employees seriously. Dianna Podmoroff, author of 501+ Great Interview Questions for Employers, notes that she has seen many of the same small business owners who agonize for weeks over the purchase of a new server or whether or not to switch cell phone plans turn around and spend almost no time at all preparing to interview an employee they might end up paying $50,000 a year.

Set an agenda and follow through
To make the job interview run smoothly, stay within the applicant's time limits, and don't get sidetracked. Mary Massad, managing director of recruiting services at Administaff, says it's imperative to set an agenda at the start of an interview. Doing this builds rapport with candidates and immediately makes them more comfortable because they have more of an idea of what to expect, she explains. This, in turn, means a candidate's answers will be more relaxed and truthful. Massad counsels to take a personable, but professional approach to the interview. "You can make a little small talk," she says, "but then it's important to dive right in."

Match candidate to boss
Interviews conducted by the human resources department-if your small business is large or lucky enough to have one-should be thought of as screening interviews only, says John Kador, author of The Manager's Book of Questions: 1001 Great Interview Questions for Hiring the Best Person. In other words, HR can weed out questionable candidates early on, but they should rarely, if ever, be used to make a final hiring decision. That should only happen after the potential employee has had an in-depth interview with the actual supervisor or boss that he or she would be working with. "Any company that doesn't conduct job interviews with managers or supervisors is making a huge mistake," he explains. "That's the only real way to figure out if a candidate is a good fit."

Conversations, not clichés
"Use questions that prompt conversations," explains Kador. "Try to keep candidates off of the canned, formulaic quotes or answers." To do this, avoid using old-fashioned questions like "What is your greatest weakness?" or "What would your former boss say about you?" Instead, Kador recommends employers have the interviewees describe themselves using one-syllable words and then give a reason or example that supports that word. Or, Podmoroff suggests eliciting real-life situations from the interviewee's past and how he or she handled them. "The best indicator of future performance is past performance," she explains. "So rather than asking a job candidate about what they would do, ask them what they did do."

The devil really is in the details
To better make sense of a candidate's answers and get sufficient information to make a hiring decision, Administaff's Massad says it's a good idea to employ the STAR (Situation, Task, Action, Result) or SHARE (Situation, Hindrance, Actions, Result, Evaluation) formats when taking notes. "What we get in many instances from candidates are great sounding answers, but, in fact, they are really vague about their specific role or the outcome," explains Massad. Consequently, she says it's important as an interviewer to set a goal of always getting as specific an answer as possible, so you can determine if that given example or referenced skill set would be transferable to your organization.

Look for job fit and culture fit
This is essential, notes Administaff's Massad. "Most companies use job openings as the beginning and end of their search," she says. But smarter companies also ensure that the decisions made when filling staff positions also adhere to a larger vision of what the business is all about. As a result, interviewers should not only be thinking about whether a particular job candidate can handle the job but whether or not he or she would be happy and satisfied while doing it. "You screen for aptitude," she says, "but interview for fit."

Let the interviewee ask some questions, too
A promising candidate should have things they are looking to find out, things that likely won't be found on your web site or in your corporate literature. Specific questions about the co-workers and supervisors related to the position or current and upcoming projects as well as broader, long-term growth inquiries are signs that a candidate has done their homework and is legitimately interested in joining your team, says Massad. By the same token, she says that interviewees that display a more self-centered focus and only ask questions about pay, benefits, and vacation time may be telling you just as much about themselves as their earlier answers.

Employer Interview Resources
-Sample job interview questions for employers
(humanresources.about.com/od/interviewing/a/one_stop.htm)
(http://www.career.vt.edu/JOBSEARC/interview/questions.htm)
-10 common job interviewer mistakes
(articles.techrepublic.com.com/5100-10881_11-6179941.html)

Get Out of the Office

SBOCTeam — Tue, 10 Feb 2009 16:06:00 GMT

Providing your employees with a reliable social support system is a key way to ensuring they stay happy and productive

By Max Berry

The link between work stress and serious depression should be a concern for every small business owner, but the way to keep your employees happy and productive may be simpler than you think. A 2007 study conducted by researchers from the University of Rochester Medical Center-and subsequently published in the American Journal of Public Health-found that, while five percent of those surveyed had struggled with serious depression, employees who felt socially supported at work were far less likely to be afflicted. Scheduling some social time for you and your coworkers away from the office is an excellent way to keep your own support system strong.

No Job is ‘Just a Job'
"Our work defines who we are. It defines you in a way you don't realize," says Dr. Emma Robertson-Blackmore, an Assistant Professor of Psychiatry at the University of Rochester and one of the leaders of the medical center's study. With so much of a person's life spent at work, the dangers of feeling isolated or unsupported at the office are very real. Employees who are unhappy in their lives are going to be unhappy in their work. That equates to unproductive time at the office and an increased number of sick days, both of which spell bad news for office morale and a company's bottom line.

Employers are often leery of encouraging office fraternization, fearing it could become a distraction. However, an office friendship is far less treacherous a distraction than isolation or unhappiness. As Robertson-Blackmore puts it, "Having someone to blow off steam with is an instant pick-me-up."

And, while the office may not be the ideal place for blowing off steam, Robertson-Blackmore contends that, wherever the steam is released, being able to release it with coworkers is important. "If you tell a spouse or family member about something you're going through at work, obviously they'll listen to you," she says. "But they're not in your work environment. [Your coworkers] get where you're coming from."

Oh, The Places You Could Go
To both encourage personal bonds between coworkers and perhaps pave the way for more socializing outside the office, consider taking your team on regular field trips. Where you go will depend on who's going with you, but here are a few ideas.

The company picnic is a tradition for a reason. A picnic is informal and may make for a good first outing, since no one will be intimidated or inhibited by the surroundings. This goes doubly for employees' family members who, presumably, will be meeting for the first time. Picnics can also be potluck, which makes for an inexpensive day.

A formal sit-down dinner at a nice restaurant may be appropriate once coworkers have already had a chance to bond and are comfortable enough with one another to enjoy the more upscale environs. A nice dinner is also a good way to celebrate an achievement at work. Plus, employees with families may appreciate the chance to have a kid-free night out.

If you are looking to include the kids, an amusement park is a viable option. Many offer discount packages for large groups or corporate events. Note, however, that roller coasters and water rides aren't everybody's speed. Gauge your staff's enthusiasm before booking the group package.

A ball game is the perfect idea for the sports fans on your staff, and even the non-sports fans will likely be interested in taking in the atmosphere. Many companies also take part in office sports leagues. This can be excellent team-building for the right group, but a word of caution: Many of your employees aren't athletic, and many others may possess a heartier competitive streak than their coworkers. Both scenarios can lead to more division than unity amongst your staff. Tread carefully.

If you're looking to bring some culture into the equation, consider a concert or a play. Many people don't make time for cultural events on their own, and would appreciate the thought. This is another good option for a first foray into extra-office socializing since it eliminates the need for small talk at the start of the evening and gives coworkers an instant conversation starter once the show is over.

A Supportive Home
Still, for any of these activities to be successful, social support must begin inside the office. Robertson-Blackmore advocates open channels of communication between coworkers and, perhaps even more importantly, employees and managers. "It comes back to a supervisor, someone invested in what you do," she says. "Being aware of an employee's needs can make such a difference."

The workplace need not turn into an arena for venting personal problems, but the knowledge that a certain degree of moral support exists is important, as is making the conscious effort to foster that support. "The facts of a workplace play a role in the health and wellbeing of employees," says Robertson-Blackmore. "A supervisor or manager has to make the [work] environment as supportive as possible so that their staff will be as productive as possible."

How Many Current Employees are in Your Departure Lounge?

SBOCTeam — Thu, 29 Jan 2009 15:19:00 GMT

By HRExpert

Nobody likes to talk about it, even though it is happening in workplaces all across America - employees who have decided it is time to fly the coop. Departure lounges are overflowing with these types of employees - all waiting for their final boarding call.

Employees rarely start a job thinking they will tour around the company for a while and then seek greener pastures, and yet it happens all the time. Here are five things you can do to prevent employees from taking flight:

Guard Your Exits

Are employees exiting as quickly as you are hiring them? If this is the case, there is a malfunction in your hiring system. Closely examine all the parts of your hiring process to determine which pieces must be fixed. For example, suppose turnover is particularly high during the first 90 days of service. Ask yourself the following:

Are we hiring the right types of people for these jobs? Yes, it is nice to hire Ivy League graduates, but are they really well suited for beverage sales?
Are we accurately representing our jobs to candidates? If your administrative job descriptions sound more like the CEO's job, then it is time for another re-write.
Are we over-promising and under-delivering? Perhaps it is time to get real. Sure, we would all like to operate like Google, but few companies actually do. Accurately describe your work environment and let candidates decide if the fit is right for them.

Now is a great time to dust off plans you may have designed for a formal exit interview process. Start asking exiting employees what you could have done differently to have prevented them from leaving. You will then have the information you need to make changes before others fly out the door.

Formally welcome everyone onboard

Imagine a place where employees are welcomed before they even set foot on company soil. This would be a place where employees feel connected before their first official day of work. Some might even start recruiting their current co-workers to join them on this new journey. Welcome to the world of Onboarding.

Onboarding is the one chance you will get to create a positive new employee experience. Just think how productive you might have been during your first few weeks or months of employment had your current or former employer taken the time to make you feel welcomed, valued, and prepared. Come to think of it, if they would have done this, you might still be working there.

You might be thinking that you don't have time to hold someone's hand or that all employees should have to suffer just like you did. Would you feel the same if you knew that with a little effort, you would have more time to focus on other initiatives besides replacing newly-hired employees?

Make checking-in easy

Could your check-in systems use some improvements? Do your employees have to stand in long lines just to have a conversation with their manager? Are employees fully aware of how well they are performing? Or is last year's performance review still on your desk waiting to be completed?

Checking-in is a two-way street. When it comes to performance, both employees and employers should know what the other is thinking. Provide feedback throughout the year so employees can adjust their performance, while seeking feedback from employees regarding ways you can improve the management of the company.

Drop the Excess Baggage

Nothing weighs a company down more than excess weight. Do you have marginal performers hiding out behind strong team members? Are employees still in your employ who have received their fifth final warning?

In this economy, you cannot afford to have anyone or anything slowing down the momentum in your organization. Look around and begin the process of eliminating excess baggage. You will be surprised how many top performers change their travel plans once they see you are committed to building an organization of outstanding employees.

Throw in some perks

The trend of slicing and dicing employee benefits seems to be quite popular during lean economic times. Many organizations have started to charge employees for items that used to be free. But is this really a way to retain the people who you will be asking to take on more responsibility during tough economic times?

Show your employees you care. Figure out what types of perks motivate your team and then start thanking them properly.

Make these changes now and you will not have to fret the next time you hear the phrase, "This is the final boarding call..."

Bio

Roberta Chinsky Matuson is the President of Human Resource Solutions (http://www.yourhrexperts.com) and has been helping companies align their people assets with their business goals. She is considered an expert in generational workforce issues. Roberta publishes a monthly newsletter "HR Matters" http://www.yourhrexperts.com/hrjoin.cgi which is jammed with resources, articles and tips to help companies navigate through sticky and complicated HR workforce issues. Click here to read her new blog on Generation Integration http://generationintegration.typepad.com/matuson/. She can be reached at 413-582-1840 or Roberta@yourhrexperts.com.

Campus Candidates

SBOCTeam — Tue, 20 Jan 2009 15:43:00 GMT

Hiring recent college grads makes great business sense. Plus, given the chance, they could even teach you a thing or two

By Max Berry

Despite what some recent figures from America's job market would have you believe, companies of all sizes are hiring new college graduates at a higher rate than in years past. A recent survey conducted by CollegeGrad.com found that 60% of American companies surveyed plan to recruit more grads in 2008 than they did last year. The reasons for the upswing are many, as are the potential benefits of hiring some new grads of your own.

Graduate Perks
"Small companies drive the engines of job creation," says David Bedard, author of Graduate and Grow Rich. "Up and coming companies need young grads." In sluggish economic times, this may be truer than ever. Recruiting and training a new graduate at an entry-level salary is much more effective for a small business owner on a tight budget than seeking out a more experienced prospect who is already used to higher pay. Factor in the number of baby boomers reaching retirement age-not to mention the salary space they leave behind-and hiring an energetic young grad begins to look like the smartest move of all.

"More than anything, grads are looking for a break and a mentor," says Bedard. And a mentorship should not be taken lightly, especially when a young employee, just beginning their career and eager to make an impression, is so amenable to the ideas and strategies of a mentor.

There are logistical benefits to hiring new graduates as well: They're more tech savvy than generations past; they haven't had time to put down roots and are more willing to relocate than someone with a family; many of them are in debt, and will be extra motivated to get themselves back in the black. Plus, after 18 years of the classroom, new graduates are anxious to apply all that hypothetical knowledge to a real-world job-and they have the energy to do it.

The New American ‘Intrepreneur'
For all that new grads have to offer, an employer needs to offer just as much in return. "There is no such thing as a cradle-to-grave job anymore," says Bedard. "If [new grads] have any entrepreneurial spirit at all, they're going to want to test the waters."

This entrepreneurial desire to "test the waters" may have helped propagate the myth that Generation Y is a flighty bunch; pampered, demanding, ready to give their two weeks at the faintest whiff of a better offer. While Bedard concedes that the reputation may be earned in isolated cases, more than anything these children of the entrepreneurial age are, as Bedard puts it, "looking for the fit," the job that will satisfy their independent, hands-on ambitions.

When it comes to courting America's brightest graduates, the ability to offer them that may be the key advantage an independent entrepreneur has on a major corporation. A national or multi-national corporatioin is regimented in a way that may not appeal to this generation, one that subscribes to what Bedard has dubbed the "make-a-job instead of take-a-job mentality."

A small company can't offer a new graduate the signing bonus or inflated salary that a large company can. What it offers instead for a young person, hungry to find their fit and test their skills, is a stake in the future of a company, be it through stocks, profit sharing, or simply a more tactile handle on day-to-day operations. According to Bedard, a small company offers a twenty-something the chance to "be an entrepreneur within a job, to feed their desire to make decisions on the front line." Employees who look for the chance to do just that are what Bedard likes to call "intrepreneurs."

Small companies are also more likely to offer their employees flexible hours, providing for a better work-life balance, which, according to a recent CollegeGrad.com survey, now surpasses financial considerations for employees aged 21 to 30.

A Turning Tide
"More graduates are going for newer and younger companies rather than blue chips," says Bedard. He's right. Another CollegeGrad.com poll, conducted in February 2006, found that 70% of recent graduates surveyed would prefer to work for a small or mid-sized company than a large one. This may be due to growing suspicions-after years of corporate reorganization, downsizing, and, in the worst cases, outright scandal-about the scruples of many large corporations. "I see more emphasis in college and business school on ethics," says Bedard. "Ethics is a buzz word on campus and that's a good thing."

But as America's graduates begin to think outside the box as to where, and with whom, their first jobs can be found, America's entrepreneurs should keep their minds just as open. Don't rule anybody out too soon. Bedard recommends looking to smaller schools-those prowled less frequently by major corporations looking to make hires-and community colleges. "Community colleges are way ahead of four year schools when it comes to teaching entrepreneurship," he says. "They make it a part of their culture."

The benefits of making Generation Y a part of yours could be substantial.

Firing the Right Way

SBOCTeam — Tue, 28 Oct 2008 16:13:00 GMT

How To Make a Difficult Task a Little Bit Easier

By Christopher Freeburn

There are few tasks less pleasant than firing an employee. There are bound to be hurt feelings and often emotions can run high. As difficult as losing a job is for the soon-to-be-former employee, however, informing him or her of that fact can be profoundly upsetting for the employer as well, particularly in a small business setting. Worse, terminating employment can produce more than simple emotional risks. Wrongful termination lawsuits can be costly for a small business-in terms of both time and money-even if successfully defended.

So how can you minimize the stress and potential legal risks of terminating an employee?

Document your reasons
Though many states still maintain the "at will" doctrine of employment (which states that an employer can fire an employee at any time for almost any reason), many other states place some restrictions on employers regarding job termination. "Realize that even an ‘at will' employment status has an implied covenant of good faith and fair dealing," says Dr. Joanne Sujansky, founder and CEO of Key Group, a Pittsburgh-based consulting firm. "Due to this, fire with cause whenever possible and make sure to document poor performance or disciplinary offenses as they occur." Sujansky advises issuing written warnings to the employee that outline the consequences should he or she fail to improve. "If an employee's performance doesn't improve, he or she will be prepared for the consequences and you will be protected when firing the person."

Check your state's labor laws to make sure you are within your legal rights before terminating an employee. Additionally, anti-discrimination statutes common in most states can provide the terminated employee with a possible basis to pursue a legal complaint. Thus it is important for an employer to maintain sufficient documentation to clearly demonstrate that the job termination was for a valid cause and did not involve any form of legally prohibited discrimination.

For this reason, it is important for employers to keep good records on their employees and to have explained, in detail and in writing, to each employee exactly what their job entails. Having some form of employee handbook, spelling out unacceptable workplace behavior, and providing a structure for evaluating employee performance is especially helpful. If an employee has been warned about their performance, maintaining a written record of those warnings is important.

It is equally important that employers demonstrate consistent behavior toward all employees. If you tolerate tardiness from one employee, but fire another for the same, you are risking a lawsuit.

The firing process
The actual act of firing someone is rarely pleasant, but you can take steps to make the process as painless as possible.

Plan ahead. Know what you are going to say before you meet with the employee. Be able to explain your decision clearly and simply. Get to the point right away, and keep the meeting as short as possible. Dragging out the conversation only makes it worse for everyone involved.

Don't do it publicly. Firing an employee in front of his co-workers is unprofessional. Worse, it can lead to lowered office morale and become a factor in any potential litigation. Remember that juries tend to be sympathetic to workers. The firing should be done in private away from other workers.

Don't waste time. Get right to the point. "Don't start the conversation with idle chit chat, such as talking about the weather, the kids, the newest client, etc.," says Sujansky. "Don't offer the employee coffee or water or food. You want him out quickly." The sooner the firing is over, the better for all concerned.

Have a witness on hand. If you company has a human resources manager, then he or she should be present, as well as the employee's immediate supervisor.

Be clear. Explain exactly why the employee is being fired. Concentrate on his or her failure to perform according to expectations. Provide a written statement, spelling out the reasons for the termination.

Pay them. Have a check ready covering any final salary owed to the employee. If a severance package is to be offered, that should also be put in writing. In most states an employer is required to pay any outstanding salary by the next scheduled payday. Money owed by the employee to the firm cannot be deducted from the paycheck. Some states require payment for accrued vacation days. Check the labor laws in your state to make sure you pay the terminated employee everything he or she is owed. "Failure to pay terminated employees in accordance with state laws can result in civil and criminal penalties," Sujansky warns.

Be polite and professional. Losing a job can be an emotional experience. Be sympathetic, but firm.

Collect company property. This includes company IDs, company credit cards, office or company car keys, or any company owned materials that the employee may possess.

Change passwords. If the employee has access to the company computer network or online systems, cancel his or her password immediately to prevent any potential theft of company information or malicious tampering.

Keep if Confidential. Office gossip is a fact of life in any business. However, allowing the details of an employee's termination to become common knowledge in the office is unprofessional. Simply inform your other employees that the terminated worker is no longer employed at your firm and leave it at that.

An ounce of prevention
Of course, the best way to avoid the unpleasantness that accompanies firing an employee is to make sure the people you hire are a good fit for the job in the first place. A rigorous screening procedure during the hiring process, including a background check, detailed interview and clear description of the position, will go a long way toward making sure you attract the best employees for your business.

Engaging From Afar

SBOCTeam — Wed, 08 Oct 2008 17:49:00 GMT

Keeping remote employees engaged can be a difficult task for a small business owner. But when managed well, your off-site employees can be just as productive as the ones you see every day.

by Max Berry

Sometime during the 20th century, the water cooler assumed a crucial position in the American office-it became a trading post not only for gossip and recaps of last night's television shows, but also for ideas and advice. With a growing number of 21st-century employees working remotely, the water cooler is a quieter place, its role more often filled by e-mail and instant messaging, videoconferences and webinars. Trading ideas used to be simpler, but that doesn't mean your small business has to endure a communication breakdown. Here are a few ways to keep your remote employees engaged and the conversation flowing.

Remote Connection
"It's all about staying connected," says management consultant Carol Hacker of managing remote employees. Regular contact via phone, e-mail, VoIP- or instant message is of course necessary for monitoring work flow and hashing out ideas, but members of a team who aren't working side by side need an established forum, one that can be accessed around the clock, on which to collaborate and check in with their colleagues.

Remote access services like those provided by Citrix (citrix.com) allow for remote workers to securely access and update centrally maintained information from their computers as easily as if they were working in the home office. Microsoft® Office Groove® offers a similar service, along with the capability to share files and create a workspace accessible to every member of your team.

With remote access to company information comes an increased security risk. However a manager chooses to keep his or her employees connected, an annual consultation with an IT specialist will help to ensure that remote connections to sensitive company and client data remain secure.

Being Clear: The Golden Rule
Once a reliable system is in place for remote employees to connect to the central office, a manager needs to set specific protocol for relations between the two entities. Since a manager can't be on-site to monitor remote employees directly, Hacker recommends creating a reference manual for remote workers. The manual should provide detailed summaries of company policy regarding data security and backup, project deadlines, appropriate use of company-issued equipment (especially notebook computers and other portable devices), the frequency with which a remote employee is expected to check in with the manager, and appropriate response times to requests and inquiries from the central office.

As Hacker puts it, "The most critical thing a manager can do is manage expectations." This means delineating, on a project-by-project basis, the objectives, deadlines, and anticipated challenges of every task a remote employee takes on.

Of course, the value of a remote employee's work can't be judged by hours logged in the office. Since they are not able to observe the way a remote employee goes about his or her task, managers must set clear guidelines pointing their employees to the desired end result. Assessing a remote worker's job performance requires a manager to trust the employee to meet company standards using his or her own strategy and technique. "Managers need to measure success by results," says Hacker, "not activity."

Keeping The ‘I' Team
A major component in job satisfaction is working with others toward a common goal. Feeling isolated from the rest of the team can diminish a remote employee's morale and hurt job performance. It is up to the manager to keep a sense of camaraderie and singular purpose among employees, remote and otherwise.

The first thing to remember is that some employees simply aren't cut out for remote work. Either they need supervision to be productive or they simply get listless if they aren't around a surplus of people. Managers looking to hire remotely should address these issues during the interview phase to make sure a new employee can handle the remote environment.

Regularly scheduled face-to-face meetings and social events can stave off the disconnected feeling in remote workers, as can the occasional "just because" call. "Don't always call [remote employees] when there's big news," advises Hacker. "Call to check in." Informal gestures like this quash the potential for a Charlie's Angels dynamic, in which a recognizably named-but eternally unseen-leader provides instructions only when necessary, and only by telephone.

But the opposite tack can be problematic as well. Hacker warns of becoming a "helicopter manager," an employer who compensates for a lack of face time by checking in too often, hovering from afar. This can be just as damaging as infrequent or impersonal contact. "It speaks to a manager not trusting his or her employees," says Hacker. "If you do that, you're going to alienate your best people."

Of course, employing remote workers also offers myriad benefits to employees, managers, and clients. A satellite office in a different time zone means staggered hours to help meet customer needs. A prospective employee who would have faced a long commute to a company's central office may be closer to a satellite office or, if both manager and worker are okay with the idea, may even be willing to telecommute. Remote offices with small staffs appeal to workers who prefer quiet and detest interruptions. And this is to say nothing of what working remotely can do for an employee's confidence. "Remote employees have the ability to approach their work according to their own strength and preferences," says Hacker. "They're almost entrepreneurs."

Farm It Out

SBOCTeam — Thu, 19 Jun 2008 20:58:00 GMT

How outsourcing payroll can save your business time and money

By Chris Freeburn

As an employer, you are probably more than happy to pay your employees well for their work, but handling all the paperwork that comes with each paycheck is probably not something any small business owner anticipates with pleasure. Keeping payroll records in order, keeping track of the correct taxes and dispensing checks or managing direct deposits for your employees is a time consuming and sometimes frustrating task.

Despite this, most small business owners choose to do it all themselves. Indeed, a recent survey by the National Federation of Independent Business (NFIB), found that roughly 64 percent of small businesses handle all payroll functions in house. "The smallest enterprises are the ones most likely to prepare payroll in-house, while the largest small businesses more often send it out," says William Dennis, a senior researcher with NFIB. "Even then, half of the largest small businesses--those employing 20 or more workers--handle payroll themselves." The survey found that in more than half the businesses that prepared payroll in house it fell to the owner to do all payroll preparation. According to the survey, cost was the most frequently cited reason for small business owners to prepare the payroll themselves.

The outsourcing solution

Fortunately for small business owners weary of tabulating tax withholdings and writing checks, payroll outsourcing options have grown rapidly over the past decade and, thanks in large measure to the Internet, the cost of outsourcing your payroll has fallen sharply.

Typically, a small business with between five and ten employees can expect to pay $100 or less, per pay period, for payroll preparation (including pay checks, direct deposit payments, employee tax and benefit calculations and record-keeping). Outsourcing payroll will also allow you to take advantage of the payroll firm's expertise in preparing tax documents like 1099 and W2 forms, which can be difficult for small business owners trying to do it on their own.

While outsourcing your company's payroll will certainly save you frustration, the benefits go well beyond reducing your stress. According to management consultant Dave Bowman of TTG Consultants, many small business owners don't realize how much time they spend on preparing payroll--time that could be better spent running or growing their businesses. "Letting yourself get distracted every week or two weeks by a huge pile of paperwork keeps your attention off the business, away from looking for new customers or streamlining operations," Bowman says. Moreover, payroll preparation is complicated, requiring small business owners to keep abreast of the latest changes in IRS guidelines. Professional payroll preparers, on the other hand, make it their business to keep track of local, state, and federal employment tax requirements, and their experience and expertise in preparing and filing employment tax reports make it far less likely that costly mistakes will be made. Or that tax reports will be filed late. Better still, most payroll service providers will prepare and file end-of-year tax documents like W2 and 1099 forms, properly and on time.

Choosing an outside payroll firm

When looking for a outside payroll provider, there are a few things you need to keep in mind.

Choose an established firm with a good track record. Contact your local Better Business Bureau to see if there have been any complaints made against the company.

Make sure the payroll company can handle your company's specific needs. Some payroll companies only handle federal and state taxes, but not city taxes. Other payroll companies will not handle companies with locations in multiple tax jurisdictions or states.

Ask how the company receives payroll information. Many large payroll firms now strongly prefer to receive payroll data over the Internet, or by email. But most will accept data via phone call. Make sure the payroll provider uses a means you are comfortable with.

Will the payroll provider accept any tax penalties that arise from its own errors? Not all payroll companies do, and the government will hold your business, not the payroll provider, ultimately responsible for any mistakes, so make sure you know where the payroll firm stands on this.

Online Management

The Internet has not only reduced the cost of payroll services, but has streamlined the process and made it much easier for small business owners. Almost all payroll service providers offer online management of payroll accounts, permitting small business owners to sign-up for payroll services, change information (adding employees, changing salaries or benefits, adjusting pay periods, etc.) with the click of a mouse. The major payroll services providers also provide telephone customer service support to deal with any questions and issues small business owners may have.