However, businesses with more employees and/or more sophisticated needs, will often outsource payroll to save time and reduce the likelihood of errors.
The second quarter is the most common time for businesses to switch payroll providers because it allows ample time for implementation, ensuring that year-end close is not affected. With the prime season for changing providers quickly approaching, many business owners and HR managers are doing their research now to find a better payroll solution. The questions on their mind are:
As you research payroll solutions use this provider checklist to guide your search efforts.
Scope of Work
While payroll providers will typically all offer standard services like payroll processing, reporting, and direct deposit, there can be variation in the types of supplemental services that are included. In some instances, a provider may offer tiered pricing services to provide additional services at a higher price point. Ensure an apples-to-apples comparison based on included services and available features before analyzing pricing, payment terms, and other factors.
Determine whether a provider’s offerings will suit your business based on how many employees it can handle and how many users are permitted. Some small business software simply cannot handle the demands of larger companies, while others can be modified to do so at an additional cost.
One of the most common service questions that owners and managers ask is how payroll taxes are handled. Discern whether the payroll provider will supply the information needed for the business to pay its own payroll taxes or whether the provider will handle it on the business’s behalf. Some providers just calculate owed taxes and make this information accessible to the business, others may supply required paperwork with this information included, and other will handle the entire process.
Ask questions to understand how each provider approaches this topic.
In addition to optional software updates and mandatory version upgrades, items like the payroll tax table will require regular updates. Inquire about how often these updates are needed and what the process of updating them looks like. With some software, updates occur automatically, while others will need to be manually initiated. Some providers will handle updates and upgrades to ensure smooth functionality, while others expect the client to handle these administrative aspects. If software does not automatically update the tax table, it is not operating on real-time information, which can lead to tax calculation errors, making it a crucial area to consider.
Accompanying the service details is the price and duration of the service agreement. Some providers will require that clients sign a contract for six months, a year, or even two years. Others will forgo the contract in favor of offering a discount for prepaying for service. Sometimes the software being utilized will have ongoing fees to maintain usage or renew the license as well. Understand what your contractual obligations are, what you can expect the total cost to be, and any fees that may be associated with getting out of the contract early.
Make a note of payroll providers that offer advanced payroll and benefits services that your business does not need now. Remember that as your business grows, its payroll needs will likely follow suit. Try to forecast where your business will be later this year or next year to avoid having to switch providers again as your business continues to evolve.
Ask whether payroll software or a payroll provider integrates with other platforms and apps to make running your business easier. Determine how you will leverage other technology to bolster the provider’s offerings. More robust integrations provide additional flexibility, decreasing labor costs and reducing payroll errors.
If your business employs hourly staff or contractors, ensure the provider includes or can integrate with time tracking software and other relevant HR functions for streamlined operations.
Know what kind of support is provided and find a provider that offers whatever level of support best matches your needs. Less tech savvy owners and managers will likely want person-to-person support channels like phone and live chat help, while more experienced personnel may only need self-help resources like tutorials and user forums. Read online reviews to find out what users are saying about the provider’s support related to courteousness, wait times, and resolving problems to determine if the support is valuable, especially if there is an added fee for premium support.
Research what current and former customers have said about each provider to understand what to expect from a client’s standpoint. Reading reviews can help uncover trends to understand whether the company is on an upward or downward trajectory. For instance, do not shy away from providers that previously had a reputation of providing lackluster customer service if it appears that they have taken the steps to improve.
Some industries have unique payroll needs. Finding a payroll provider that is tailored to handle those specific challenges and idiosyncrasies from the beginning can save time and headaches later. It is always best to use a solution that is meant for a specific application rather than trying to adapt something else, which is why restaurants and retail stores, for instance, will look for payroll providers that cater to their individual industries.
A payroll provider should meet your business where it is. Small business will typically benefit from using a provider that is aligned with their budget restrictions and time constraints. Similarly, high-growth startups should seek a payroll provider that can efficiently handle big hiring pushes.
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