Even if you avoid mistakes, 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, and then sending it to the various government entities, could be spent actually making money. That’s why so many businesses are turning to outsourced payroll services.
Taking the long view, the penalties for innocent mistakes are much more expensive than the cost of a payroll service.
At a minimum there are three things that a payroll service should do for you:
- Pay your employees on time
- Pay your payroll taxes on time
- And actually file your payroll tax forms on time
You want to do all three of those to be compliant with the law, and avoid fines. It’s critical that you pick the right service for your small business.
A simple Google search of “payroll service” yields about half a million results, and with so many options to choose from, narrowing down those results can be a challenge.
Getting a referral from someone you trust is the smart way to start your search. If you can get a recommendation from a controller, a CFO, a CPA, or an attorney that’s probably a reliable source. You might also try getting references from other similar businesses in your area.
You should ask yourself; what services do you really need?
Does the payroll service you are considering have accountants and lawyers on staff? Some of the best small payroll firms are really accounting firms that have set up payroll services as a second company, which can be really useful for your other financial, tax, and legal needs.
Ask yourself questions like:
- How much you plan on growing?
- How many full-time, part-time, and contract employees will you have on your payroll throughout the year?
- Will you need a company that can handle different state and federal taxes?
- Will you be offering employees 401(k)s and other deductions?
- How often do you want to issue paychecks?
Your service should be familiar with the relevant laws of your state as well as the federal statutes; it should update its software accordingly and alert you to relevant changes.
Your service should have experience servicing your type of business and employees, especially if there is something unusual about your business. Perhaps you have union workers in your company. Make sure you go with a service that has dealt with union rules before. Perhaps on some (but not all), jobs your workers are paid “Prevailing Rates” set by government contracts, make sure your service can handle multiple wage rates. If you run a restaurant, where servers receive tips, your payroll service needs to know how to file taxes accordingly, as well as how to keep you compliant with minimum wage regulations regarding tipped employees. As you narrow down your options, look through the references provided. It’s crucial that the service is familiar with your line of work.
With some of the largest, national payroll companies, you need to realize that they will likely try to bundle your payroll package with additional services that you might not need, like human resources capabilities. This will drive up your monthly costs. Make sure you’re not getting over-served. Bigger is almost never better when it comes to customer service, unless you’re a fan of waiting on hold for the next available representative.
Also they are famous for escalating rates on time and on schedule. It’s a punishing loyalty strategy they get away with it because change is sometimes difficult, even perceived as risky. They know this, and so over time you may be paying double what another comparable business is paying because you are an established customer and the other company is a new business. They are collecting a “fear premium” from you based on old adages like “if it isn’t broke don’t fix it” and “better the devil you know.”
If you complain about a new charge for one thing (for example direct deposits), they will try to switch your service package, giving you free direct deposits, but will start charging you more for other things never before mentioned that previously had been included. If you have ever experienced the tug of war between Verizon and Comcast you will have an idea of what I am talking about.
The apples and oranges problem; each payroll service describes what they do a bit differently, each charge for those services in a different way. You need to first figure out what you need and then work out what the annual cost would be from each service. Get then to give you a firm quote, make sure it includes: paying the employees; paying the taxes; registering you if necessary; full reports; delivery; filing the Quarterly returns; yearend charges; and W-2 preparation.
One simple way to test the quality of the service is to call the main number and see how long it takes to get to a geek. If you’re testing a large company make sure it’s the service number, because the sales line is always answered promptly.
- Ask for references
- Ask for sample reports
- Ask for a price sheet
- How fast is turnaround?
- If the service makes a mistake will they accept liability for fines?
- Are there additional charges not disclosed?
- Will the fees change or increase after one year?
- How often will you receive reports from the service?
- Is there an additional cost to file taxes in multiple states?
- Is the software easy to use? Can they demonstrate it for you?
You need to know what will be required of you, as well.
Have organized files ready with employee names, addresses, Social Security numbers, wage rates, withholdings claimed, and any other deductions they’re eligible for. Most of this will be in that stack of W-4s you probably have in a folder. For direct deposit, you’ll need voided checks from your employees. You will need year-to-date wage and tax numbers for each employee.
The most recent quarterly report is also useful to set up a payroll service.
If you have any questions about how to choose the best payroll service for your business, please contact Granite Payroll.
Granite Online is a powerful web-based payroll solution designed to streamline payroll operations while enhancing flexibility, security, and control. This dynamic product enables you to maintain control of your payroll data while utilizing our payroll expertise. With 24/7 convenience, Granite Online allows instantaneous e-transfers, printing of live checks and payroll reports, and tracking of human resource data. This easy-to-use payroll product lets you know what’s happening in real-time, so you can minimize costly productivity issues. Whether your company is large or small, local or nationwide, our payroll specialists are at your service.