Choosing a Payroll Service
All businesses with employees run some sort of payroll in order to get their staff paid. Instead of processing it on their own or outsourcing the task, many of today’s companies opt for an online payroll service to make this process simpler and more convenient. Online payroll services operate in the cloud. They don’t require any software to be installed or maintained, and businesses can manage and run their payroll from anywhere. They can be used to pay full-time and part-time employees as well as contract and freelance workers.
Online payroll typically includes a variety of services:
Payroll processing: Online payroll services automatically calculate how much employees should be paid each pay period. The systems account for wage rates, shift differentials, overtime, holiday pay and taxes as well as Social Security and benefit deductions. They then make payments to employees by direct deposit, prepaid debit cards or paper check.
File and pay payroll taxes: These services can withhold employee taxes, file quarterly payroll tax reports, and pay tax withholdings to the proper local, state, and federal agencies. They also issue employee W-2 and 1099 forms at the end of the year. Some services offer an error-free guarantee. If a mistake is made, these payroll companies will correct the error and pay any fines or interest incurred.
New hire reporting: Many payroll services report new hires to the government on your behalf.
Integrations: Online payroll services integrate with a variety of payroll-related programs businesses are already using, such as accounting software, time and attendance systems, and human resources software.
Paid-time-off management: Many of these services manage paid time off by tracking how many vacation and sick hours employees have earned and how much they’ve used. Some payroll solutions even facilitate the time off request and approval process.
Employee self-service: Typically, employees can access the online system to view pay stubs, PTO balances and year-end tax forms.
Mobile access: Many systems offer mobile apps or mobile-friendly websites that let businesses manage and run payroll from smartphones or tablets.
Payroll reports: Detailed wage and labor reports from your service can provide a deeper look at how a business operates
How Much Does Online Payroll Cost?
The cost of payroll services varies, but most follow a standard pricing structure: a flat base fee that is charged per month or per pay period. With per-pay-period providers, you are charged each time you run payroll, while per-month providers allow for unlimited payrolls each month.
Features. Besides payroll processing and the handling of all tax obligations, you should consider whether the service offers multiple pay options, like direct deposit, paper checks or prepaid debit cards. You’ll also want to see if the provider offers multiple wage rates, garnishment payments, paid-time-off management, workers’ compensation administration, unemployment insurance and detailed payroll reports.
Ease of use. The payroll service should not be too complex to understand. It should have an easy-to-use interface that allows you to run payroll and add employees into the system in a matter of minutes.
How to Choose a Payroll Service
The only thing more conventional than “keeping the books” is screwing them up. In fact, the two typically go hand-in-hand, as the IRS penalizes about one out of every three business owners for payroll errors. Choosing the best payroll service for your needs can help you to reduce bookkeeping and other errors.
Even if mistakes weren’t so commonplace, doing your own payroll can still cost you. The valuable time and energy you spend figuring out how much money you have to give away could be spent actually making money. That’s why so many businesses are turning to outsourced payroll services.
“One of my rules is if you have one employee, get a payroll service,” says Rhonda Abrams, president of the business services site The Planning Shop and author of the guidebook Hire Your First Employee. “The penalties for screwing up are so much more expensive than the cost for payroll.”
How to Choose a Payroll Service: Where to Look
A simple Google search of “payroll service” yields about 485,000 results, and with so many options to choose from, narrowing down those results can be just as difficult as crunching numbers yourself.
How to Choose a Payroll Service: Services and Pricing
Now that you’ve narrowed down your referrals and checked out their online reputations, you need to make sure that the company offers all the services you need upfront.
Tips for Choosing a Payroll Service
When payday rolls around employees automatically assume they will not only be paid but be paid the correct amount. An easy way to ensure everyone is receiving payment and the IRS is not on your back is to use a payroll service. Use these tips to evaluate and choose a payroll company to handle your small business needs.
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 will be honest about their level of satisfaction with the company. Once you have a few services you are interested in ask if they can provide you with two or three references from clients who have businesses similar to your own. Recommendations are the best way to discover the reputation and quality of the firm.
Prices and Hidden Fees:
The first question on everyone’s mind and the first question that need 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. Also, be sure to see 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 include direct deposit, customized reports, as well as 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.
TIPS FOR CHOOSING A PAYROLL PROVIDER
Are you considering converting to a new payroll provider, but hesitant to make a change? You may be concerned about missing payroll periods or data errors during the transition, but it doesn’t have to be chaotic.
TIMING OF A PAYROLL CONVERSION
Deciding when to implement a new payroll solution is important. If you are considering a mid-year conversion, Quarter 2 is a good time to start the process. Another option is to convert at the end of the year. The ideal time to begin a year-end conversion is October so it doesn’t conflict with any year-end processing you need to handle.
DATA CONVERSION
When considering a conversion, it’s important to also look at whether the payroll system is unified with core HR and attendance. When payroll, core HR, and time tracking data are stored in a centralized database
DATA INTEGRATION CAPABILITIES
Many companies have existing business investments for benefits, such as general ledger software, point-of-sale (POS) systems, and retirement packages. The ability to integrate these existing systems with an online payroll system is a huge benefit as all of the data is accurate and up-to-date
PAYROLL TAX COMPLIANCE MANAGEMENT
With payroll tax compliance rules constantly changing, it’s crucial to utilize a payroll provider with a tax compliance department that will help manage these updates. Once conversion is complete, a tax compliance team should update your payroll tax tables each year, and help with year-end processing.
How to Choose the Right Payroll Service
Consider factors like cost, features, ease of use, and more as you shop for a payroll system.
Running payroll might not be your forte, but it’s a necessary part of being an employer. To ease your responsibilities, you could try a payroll service, a type of software as a service (SaaS).
Questions to Ask Before Choosing a Payroll Software
Payroll software automates your payroll-related responsibilities, such as calculating employee wages, withholding taxes, and paying employees.
How much do I know about payroll?
If you aren’t a payroll expert, you need an easy-to-use software solution. Payroll software automates a complex process, and the point of automation is to free your time, not take it up.
Which basic features should a payroll software have?
First, let’s go over the key parts of running payroll. Running payroll is the process of entering the hours employees worked during a pay period, calculating their gross wages, determining deductions, and giving employees their net pay.
Payroll software saves you from manually running payroll. Here are a few basic features you should keep an eye out for when shopping for payroll software:
Taxes: Payroll software automatically withholds taxes from each employee’s paychecks. If you want the software to go a step farther and file taxes for you, opt for a full-service payroll software.
Accuracy: Mistakes on payroll result in penalties for your business. Find a provider that guarantees accuracy.
Multiple payment options: If you want the option of paying employees with direct deposit or paychecks, find a provider that accommodates both and offers free direct deposit. According to the National Automated Clearing House Association(link is external) (NACHA), 82% of workers receive their wages via direct deposit, so try to offer this payment method.
Time and attendance integration: Some software providers offer a time and attendance add-on to help with attendance management. This lets employees enter the hours they worked. All you need to do is approve their hours.