Guide on Choosing a Payroll Service Company

What is payroll outsourcing? Why would I want to use it?

Everyone likes getting paid, but being on the opposite end can be a hassle. Although payroll processing is important for all businesses, it can also be a tedious and complex process. From managing employees’ wages to properly calculating and paying local, state, and federal taxes, payroll processing can quickly become a confusing tangle. Payroll processing can also tie up valuable company resources, taking hours and occupying employees who could otherwise direct their efforts to other company business.  

Because of these reasons, many businesses, including small and medium-sized businesses, find it best to hand off these responsibilities to payroll processing companies. Sometimes called payroll outsourcing, these types of services can dramatically free up time and increase productivity. Aside from freeing up company time, relying on payroll processing companies can also save employers the trouble of having to do research and keep up on important tax regulations. Many payroll processing companies even guarantee that their calculations will be correct, and vow to cover any fines or penalties incurred for errors in filing with the IRS.

How does it work?

Traditionally, payroll information had to be called or faxed in to processing companies, but now payroll outsourcing is easier than ever as most companies have turned to computers and the internet to simplify and speed up the process. Now taking care of payroll can be as simple as using computer software to configure data or submitting information to payroll processing companies online. Most companies promise that the entire process takes only a few minutes, and they take care of the rest. Using the internet also means that you have greater flexibility as to when you have to submit payroll information, and you can access and review your account anytime.

Most payroll processing companies also offer a variety of ways to pay your employees, from direct deposit, to printing out checks yourself, to having checks delivered ready to be distributed, or even using your own checking account. Most companies also allow you to mix these different options, so that some employees can be paid through direct deposit and others can be paid by check, depending on their preference.

Is using a payroll processing service safe?
If you are worried about security and the safety of transmitting payroll information online, don’t be. Pay attention when you’re shopping around, but most payroll processing companies not only protect your account through the use of a password, but they also use firewalls and bit encryption to make sure your data is secure. In fact, chances are that using a payroll processing company is more secure than simply having payroll information saved in your office or on your own computer.

Choosing a payroll processing company

How do I choose one that’s right for my business?

While payroll outsourcing can be helpful to all businesses, it is important to choose the vendor, and the plan, that is right for you. Most payroll processing companies offer a variety of different services at a variety of different prices, so it’s important to make sure that you are getting all the services you need and that you are not paying for something you do not. For example, many payroll processing companies handle all aspects of payroll processing, from helping businesses to keep track of their employees’ hours, to delivering employees’ checks ready to be distributed, to taking care of all tax payments and filings, but it is important to remember that they charge according to how much of the payroll processing you actually hand over to them. Usually, how much you pay is also going to depend on how many employees you have.

Tips

1.) Know what you want- There are a lot of options out there, so before you start shopping around, decide how much of the payroll process you actually want to hand over. Do you just need software or an online program that will help you do your payroll yourself, or do you want a payroll processing company to do all the work for you? Do you just want payroll taken care of, or do you also want a service that will take care of your taxes?

2.) Do your homework- Many payroll processing companies have very helpful websites that provide information on the different services they offer. Some even have video overviews, demonstrations, or areas that will allow you to run a sample payroll. Take advantage of these resources. Compare different companies, and if you still have questions, call or e-mail them.

3.) Make sure you know what you’re paying for, and that you’re getting what you pay for- Find out exactly what features and services come with the plan you buy. For example, will checks be delivered to you, or are you responsible for printing or writing them out yourself? Also, don’t just assume that a payroll processing company will take care of your taxes for you. And if they do, don’t just assume that means they take care of all taxes, including federal, state, and local taxes. Also take note that while some services provide things like direct deposit and tax preparation for free, others charge extra.

4.) Check your files and records periodically- Even if the payroll processing company you choose says it will take care of your taxes and promises to cover any penalties, review your records every once in a while to make sure everything is being taken care of as planned. The IRS website stresses that “The employer is ultimately responsible for the deposit and payment of federal tax liabilities. Even though the third-party is making the deposits, the employer is the responsible party.” It’s also a good idea to make sure your employees are being paid correctly and on time.

5.) Buyer Beware- Some payroll processing companies that offer to do your taxes for you impound your taxes, which means they hold that money as long as possible and make interest off of it until they have to hand it over to the IRS. Find out if your payroll processing company does this, and if so, make sure it doesn’t negatively impact you or your business in any way.

6.) Make sure it works for you- No matter what company you choose or how large or small they are, do they work for you? Can you quickly and easily submit data, review information, obtain your employees’ checks, etc.? If you need help, are you comfortable with the customer service? Will this company ultimately save you time and money?