Welcome to our weekly Buyers Guide series where we share everything you need to know about specific business purchases, including the questions to expect and the questions to ask. Here’s how to choose the right payroll provider for your business.
Running payroll is an essential part of business operations, but can be tedious and time consuming. Outsourcing your payroll services can not only free up your bandwidth, but can help mitigate tax risks and reduce cost. While there are several payroll providers to choose from, you can ensure your business is set up for success by picking the best one for you needs.
WHY YOU NEED A PAYROLL PROVIDER
Payroll needs vary for every business at different stages of growth. However, by outsourcing your payroll to a qualified payroll provider you can simplify your payroll processing, prevent tax filing errors, and save money. Your payroll provider will collect wage and hourly information from your employees, subtract withholdings and deductions where necessary, make direct deposits, print checks, and prepare tax filings. They will also take care of mailing out W-2 and 1099 forms and can help with resolving IRS inquiries. There are also payroll providers who can provide additional HR resources such as handling employee benefits.
WHY YOU NEED A PAYROLL PROVIDER NOW
Payroll processing mistakes can cost you time, employee happiness, and thousands of dollars in IRS penalties. The IRS issued nearly 7 million penalties totaling $4.5 Billion to US businesses in 2013 alone and with an average of one change per day in the tax code, it’s no wonder it’s estimated that an entrepreneur can lose the equivalent of three weeks per year dealing with payroll taxes. By outsourcing your payroll to a reputable payroll provider, you can help protect yourself against these scary statistics.
IMPORTANT PAYROLL PROVIDER CONSIDERATIONS
Outsourcing your payroll to a provider can allow you to focus more on your core business and prevent costly errors. We can help determine the perfect payroll provider for your business to match your employee headcount, budget, HR needs, etc.
Here are some considerations to take into account when searching for a payroll provider partner:
QUESTIONS TO ASK A PAYROLL PROVIDER:
- What specific payroll services do you provide? What add-on services do you offer (benefits, retirement plan services, etc.)?
- Do you integrate with accounting software and which ones?
- What is your pricing structure? How do headcount increases or decreases shift the cost?
- What type of customer support can I expect?
- How does your service handle payroll taxes specifically?
- What does on-boarding and set up look like?
- What security measures do you have in place to protect my business’ data?
- How will my employees be able to access their information (paystubs etc.)?
- What accountability do you have in terms of payroll errors? How quickly can you re-run payroll in case of error?
- Will you be able to scale with my company as we continue to grow? What size companies do you usually service?
QUESTIONS THE PAYROLL PROVIDER MIGHT ASK YOU:
- Do you have an employee identification number (EIN)?
- How many employees do you have?
- Do you have the appropriate state/local id numbers to process taxes?
- How many employees vs. independent contractors do you have?
- Have all employees completed the appropriate federal forms (W-4, etc.)?
- How do you currently track employee hours and paid time off? How will you want to track them moving forward?
- What is your pay period?
- Who should the payroll information be provided to?
- Do you use an accountant as well?
- What payroll reports are most important for your business?
The payroll market is highly competitive and cost can vary per market. The basic service can cost between $.80-$2.00 per check plus a base account fee depending on pay period with cost of added services varying dependent on service (tax filing, etc.). Payroll services often charge for adding or dropping employees. This is worth inquiring about upfront to prevent any surprising costs. Be sure to have a good idea of all the services you will need when negotiating pricing and contract with a payroll service.
Contract terms greatly vary on your companies need. As mentioned above, be sure to have an idea of what your needs are and what you would be willing to pay.
Ask for the ability to speak with businesses in similar industries, of similar size, and with similar payroll service needs. If possible, try to identify a client that they don’t list as a reference to perhaps learn some of the downfalls with the firm.
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