Let’s face it: payroll can be a real pain. It’s not as simple as just writing your employees a check every two weeks. There are federal, state, and local taxes you’ll need to calculate and withhold. There are tax forms that you’ll have to put together and send out. You may have to deal with time tracking or 401(k) or HSA contributions. Essentially, it’s a lot of paperwork and it’s easy to mess it up.
You may think that your business is too small to warrant the money and hassle of utilizing a payroll service, but experts advise that even if you have just one employee, then a payroll service is worth the cost. Outsourcing your small business payroll needs can save you time, money, and headaches.
If you’ve never worked with a payroll service before, then you may not be sure how to select the right one for your small business. Here’s how to find the right fit:
1) Payroll Service Options Abound: Ask for Referrals
There are thousands of possible payroll services to choose from. As with any vendor or new technology, it pays to do some background research before you chose one.
Experts recommend that you begin your payroll service search by asking for a referral from a trusted resource. You may seek recommendations from your current accountant, legal professional, or local business network. By asking local companies which services they use and how they like it, you can get real world information on ease of use, reliability, and customer service.
Once you get a few top recommendations, spend some time online checking out the top candidates. Go to the payroll service websites and see if they are user-friendly. Check out review sites and see if there are any customer recommendations or complaints. It’s also important to look at the Better Business Bureau (BBB) to see if there are any serious complaints or pending legal issues.
2) Make a List: What Services Do You Really Need?
Not all payroll services are considered equal, and not all will fit the needs of all businesses. Customizing your payroll service needs is important, since it will help your business run smoothly. Plus, articulating what you do need from your payroll service ahead of time will prevent you from bundling costly add-ons you don’t need.
A two-person work-at-home business will have different payroll requirements than a restaurant that employees fifty people. A business that pays its employees based on commission will have different needs than one that uses salaries or hourly wages. Prepare a list of goals and questions to help you select the best payroll package to meet your current needs, and cover your business as it grows.
3) Key Business Questions to Ask Before Selecting a Payroll Service
Answer these key questions before searching for a payroll service:
- What services will your business need in the next year?
- What services will your business need in the next five years?
- How many employees are on your payroll?
- How many full-time employees do you have?
- How many part-time employees do you have?
- Do you have a human resources department?
- Do you need to manage retirement (401K) accounts?
- How often are your employees paid?
- Do you need direct deposit?
- Do you want any add-ons services, such as W-2 forms, online pay stubs, or online time tracking?
4) Bigger Isn’t Always Better
When it comes to running your small business, opting for the biggest names in payroll service may not be what you need. Intuit Online Payroll, ADP, and PayChex are well-respected, reputable payroll services. Each of these companies offer affordable monthly package deals for small businesses.
According to the pros, however, you should be cautious about picking the biggest package from the biggest payroll service. Since the larger companies also cater to larger businesses, you may be paying for bundled services which your small business doesn’t need. You may also get less by way of customer service, since they’ll be focused on their larger clients. Shop around, and compare both costs and services before making your ultimate decision.
5) Comparing Payroll Services and Package Cost
When you’re comparing payroll services, make sure you’re comparing the same services across the board. Refer back to the list you made and the needs you expressed.
According to Ken Darrow, editor of Payroll for Dummies, “"There's three things that payroll should do for you … It pays employees on time, it pays your payroll taxes on time, and it actually files your payroll tax forms on time. You want to do all three of those to be compliant with the law, and you also better do the last two or you'll get fined.”
Consider pricing. They are two ways which payroll services charge for their services — either by the month or by the pay period. Pick just the services you need each month, and don’t be pressured into the services you do not need (these come at an extra cost)!
Request a quote for the full amount per month. The price will vary depending on what services you opt for, your add-ons, and the number of employees your business employees. Take the time to compare the prices and services each payroll service quote includes.
6) Additional Questions to Ask Your Payroll Service
There are two additional points to review before committing to the service. The first is whether or not the prospective payroll provides a web platform. An online platform ensures accuracy of data, and may also be cheaper in the long run. Plus, your employees may like having access to their own financial information online.
The second question is how the payroll service handles taxes. Some larger payroll services will set aside tax money to file later. This can be an issue for smaller businesses who may not have the financial latitude to set aside a large portion of money. If cash flow is an issue for your small business, then knowing whether or not your taxes will be impounded may be important for you.
Making The Choice
A top-notch payroll service can save you time, money, and energy, while keeping you organized. Selecting the right payroll service for your small business is simply a matter of doing your research, assessing your payroll needs, and finding the right match for your company.
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