Tips for Choosing a Payroll Service

What payroll service provider should you use? Use these tips to evaluate and choose a payroll company to handle your small business needs.

When payday rolls around, employees automatically assume they will not only be paid, but be paid the correct amount. An easy way to help ensure everyone is receiving payment and to keep the IRS off your back is a payroll service. Although you could do small business payroll yourself using specialized software, it’s often less time-consuming and less stressful to use a professional service to deal with confusing tax laws and make sure everything is handled correctly.

Recommendations

One way to find a payroll service is to ask other small businesses for their recommendations. A recommendation from someone you know means that chances are they’ll be honest about their level of satisfaction with the company.

Once you have a few services you’re interested in, ask if they can provide you with two or three references from clients who have businesses similar to your own. Recommendations are a good way to discover the reputation and quality of the firm.

Also, find out how long the company has been in business. Check their reputation with the Better Business Bureau and search online for reviews of the payroll company (see Better Business Bureau definition). These are important points to know because, ultimately, it’s your company, not the payroll company, that’s responsible for reporting and paying in payroll taxes.

Should a payroll company you deal with fail to remit your payroll taxes to the government (and perhaps go out of business), you’ll have to pay the money owed to the government yourself, even though the payroll company took it out of your account.

Prices and Hidden Fees

The first question on everyone’s mind and the first question that needs to be asked is: How much?

They may charge a flat-fee with an additional charge per check or a charge based on the frequency of payroll. You may want to pay your employees every week but find that every other week will save you money. This is something that should be taken into consideration.

Be sure to request a detailed breakdown of the bill to discover those hidden fees that some companies may “forget” to mention. For example, simply changing an employee to direct deposit or adding a new employee might accrue additional charges. You may also want to ask if the charges and fees you were quoted are subject to change and, if so, do they increase frequently?

Special Services

In addition to paychecks, payroll services often offer other special services for businesses. These special services can include direct deposit, customized reports, and the administering of employee benefits, retirement plans, and pre-tax deductions for medical insurance or childcare.

Some companies are capable of developing customized software tailored to your specific needs. If you have employees in different states, you must make sure the company has national coverage capabilities.

Ease of Use and Accessibility

Most payroll services today allow access to a secure site for employees to view their individual payroll history. Having a password-protected website to view and print pay stubs, review payroll history, and keep track of sick, personal, and vacation days provides a better service for your employees. Having this information at their fingertips will also decrease the number of payroll questions you have to answer.

A web-based payroll system, though commonplace, is not the only way you can provide the information for payroll. Some payroll services require phone-ins at a specific date and time, which can be very inconvenient for the ever-changing schedule. There’s also the option to fax or e-mail. But being able to enter information anytime, anywhere from a web browser gives you an opportunity to double-check that all the information is correct and easily make adjustments.

Once you determine which medium of communication works best for you, find out whether the provider can accommodate those needs. Providing information for the payroll service should be easy and convenient, not complex and a hassle. Remember, a payroll service is supposed to alleviate stress.

Responsibility and Customer Service

A payroll service frequently makes mistakes can be a source of great frustration. And although you should only sign with a provider that guarantees they’ll absorb the costs of their mistakes, you don’t want to worry about whose check will be incorrect next payday. As mentioned previously, you should ask each payroll service for references from similar accounts. Research the provider’s accuracy, integrity, response time, professionalism, and customer service.

Everyone makes mistakes; even the best payroll services can make an error at some point. What defines the company is how they react to their error and whether or not responsibility is taken. Ask them how quickly new checks will be provided if a mistake is made. And make sure the payroll service is liable for tax mistakes since the penalties for such a mistake can be very steep.

Customer service is also key. You don’t want to hold for 20 minutes on the phone only to reach someone unfamiliar with your account and therefore unable to answer your question. Find out if they have other options besides calling to receive help or answers. Perhaps they can respond sooner to e-mails?

Who will handle your account?

Last but certainly not least is to find out who will be handling your account. You may have met with the experienced head honcho as you signed the dotted line, but, once you leave, they assign your account to an inexperienced intern.

Once you find out who will be in charge of your account, make sure it’s someone you feel comfortable with and someone who encourages you to ask questions. You’ll be dealing with this individual on a regular basis, and you don’t want to work with someone who makes you feel uncomfortable every time you don’t understand something.

The more you know about the payroll service the better off you’ll be, because, in the end, it’s about finding a company that will meet your needs and the needs of your business.

Disclaimer: The content on this page is for informational purposes only, and does not constitute legal, tax, or accounting advice. If you have specific questions about any of these topics, seek the counsel of a licensed professional.