Doing payroll yourself is technically possible with software like Gusto, QuickBooks Payroll, or ADP. These tools calculate withholdings, generate paychecks, and file tax returns automatically. For a business with one or two salaried employees and straightforward pay, DIY payroll can work fine.

The challenge is that payroll isn’t just cutting checks. California has specific requirements that trip up business owners. Meal and rest break penalties, overtime rules for non-exempt employees, sick leave accrual tracking, and local taxes in certain jurisdictions all need to be handled correctly. Miss a filing deadline or calculate withholdings wrong, and penalties add up fast. The IRS assesses penalties for late payroll tax deposits starting at 2% and climbing to 15% depending on how late you are. California’s EDD has its own penalty structure on top of that.

Time is the hidden cost of DIY payroll. Running payroll takes 30 minutes to an hour each pay period if nothing goes wrong. But things go wrong. An employee moves and needs their tax withholding updated. Someone takes unpaid leave and you need to prorate. Year-end W-2s don’t reconcile with your quarterly filings. Each issue pulls you away from running your business.

The real question is what your time is worth and what a mistake would cost you.

Outsourcing makes sense when you have multiple employees, hourly workers with variable schedules, or you simply don’t want to think about payroll compliance. A full-service payroll provider handles the calculations, deposits, filings, and year-end reporting. You review and approve, then get back to work.

For Los Angeles small businesses, this matters because California wage and hour rules are more complex than most states. The cost of outsourcing is often less than the time you’d spend doing it yourself, and far less than a single penalty for a missed deposit or incorrect filing.

If you have one or two salaried employees and you’re comfortable learning the software, DIY can work. If you have hourly workers, multiple employees, or you’d rather focus on growing your business than studying payroll tax calendars, outsourcing is usually the better choice. Many of the Los Angeles bookkeeping services we provide include payroll coordination so everything stays connected to your books without extra work on your end.