There's no one-size-fits-all payroll company. Available services range from Web-based computer programs to full-service accounting assistance. Finding the perfect fit between client and provider helps businesses derive the most value from payroll administration services.
Six Criteria for Evaluating Payroll Services
Businesses venturing into the payroll outsourcing market are likely to discover a valuable resource for cutting administrative headache and costs. They will also encounter a bewildering array of payroll companies. To evaluate the available options, businesses can use the following criteria as their guide:
How long has the payroll company been in business? Does the company stay current on changes in regulations and tax withholding rules? Ask for client references and staff training procedures. Positive customer experiences and regular staff training programs can offer clues to the company's level of expertise.
2. Geographical Coverage
Many businesses can benefit from a payroll service with a national or even an international scope. As one industry advisor puts it, "If you have operations in more than one location or think you may in the future, it's essential to work with a provider that has national coverage." Geographical coverage ensures that remote office locations have access to local expertise and comply with the particular requirements of different state and local authorities.
Payroll companies have different policies regarding legal liability for any accounting mistakes. Businesses can insure against payroll errors by finding a service that guarantees their work. Many payroll companies accept liability for penalties caused by late or insufficient payment.
4. Ease of Use
An easy-to-use Web interface is a signal benefit of a third-party payroll service. Businesses can save time and catch errors by entering payroll data directly into a Web-accessible payroll system. It's important to evaluate the provider's technological resources carefully--the system should be robust enough to meet business requirements yet simple enough to accommodate non-technical users.
As an added benefit, many payroll companies also offer an employee self-service portal. Allowing employees to view payroll history and update personal information is not only good for employees, but also for the internal HR staff who would otherwise field employee inquiries about payroll.
Businesses should take into account their unique requirements when vetting payroll service providers. Some providers offer industry-specific expertise in fields such as hospitality, healthcare, legal practice, and more. If billable hours or tips are features of the business, for example, businesses need to make sure the payroll company's system supports them.
Last but not least, evaluate both the cost and cost structure of the payroll service. Choosing a favorable cost structure can save businesses money. The two most common fee structures are per-payroll and per-employee. In the former, businesses pay based on the number of times they process payroll each month. In the latter, businesses pay based on the number of employees, not the frequency of payment. Small companies will likely be better off with a per-person fee.
These six factors represent the primary criteria for choosing a payroll service company. Other considerations include customer service, security, reporting options, direct deposit, and turnaround times. By keeping these factors in mind, businesses can find a payroll company that not only offers the best service, but also offers the service that fits best.
The CPA Technology Advisor