How to Pick the Right Payroll Service for your Business?
Managing payroll is often considered to be one of the most complex activities in a business. This is evident from the fact that every one out of three startup owners are penalized by the IRS for their payroll-related mistakes. Apart from the tax matters, paying more can be loss-making for your business, and paying less can lead to unhappy employees.
A modern solution for avoiding these mistakes is to avail a payroll service. If selected wisely, the decision can completely automate your payroll process, thereby allowing you to spend your precious time on growing the actual business.
Let us explore what payroll service is and what factors should be evaluated in picking the right payroll service for your small business.
What are Payroll Services?
A payroll service provider is an outsourced partner that takes care of your entire payroll process, including payment calculations, tax calculations, paycheck dispatches and year-end account. With their extensive expertise, payroll service providers offer a hassle-free solution for all of your payroll-related matters.
The primary role of payroll service provider is to ensure that all employees are paid accurately, and that tax calculations are free from errors. Many payroll companies also offer cloud solutions, through which you can view, analyze and approve payroll payments.
Types of Payroll Services
The payroll service providers offer a range of solutions. Some of the most common services include:
Time and Attendance Management
The first, and the most complicated, step in the payroll process is recording of employee time. This is especially true for businesses operating in service, employee-intensive industries. For instance, hospitals employ a wide range of staff working in different shifts. The standard shifts for each staff type also varies, and it is difficult to manage all the complexities with as simple software. Time and attendance management services provide you with the correct number of hours for staff, making it easy to determine final pay.
This service involves taking care of the taxation aspect of payroll, such as withholding taxes, calculating final tax liabilities, and submitting the required forms to the tax authorities. Many payroll services also offer a guarantee, protecting your business from any potential fines or penalties.
Paycheck service can be availed separately or in combination with the entire package. The service involves making payments to the employees based on their preferred payment method. This makes it easy for the business to pay via a single method, and transferring the hassle of paying through a different method to the outsourced partner.
Employee self-service, commonly referred to as ESS, allows the employees to log their time, attendance, leaves and other special requests from a portal. The employees can also use it to view their payroll, taxes and other entitlements. ESS serves as a medium of interaction between business owners, human resource function, and the employees.
A key component of all software solutions is reporting. Payroll service providers offer detailed reports that can be used to make business decisions. Some service providers also offer consultancy services, and may provide valuable insights into employee performance.
Benefits of Payroll Services
There are numerous benefits of availing a payroll service. Some of the key benefits include:
Availing a payroll service saves your precious time. Payroll is not a value-adding activity to be retained in-house. Instead, it is among the problematic activities that should be outsourced to an expert as soon as practically possible. The time saved here can be used to expand the business.
Cost-saving is one of the major advantages of outsourcing. Retaining the payroll in-house requires dedicated resources in form of staff and software. Moreover, any mistakes can be costly, and availing a fixed-price solution can make it easier to forecast future positions.
Perhaps the most significant benefit of availing a payroll service is accuracy. There are tons of rules and regulations related to payroll services, and being a small business owner, it can be really difficult for you to stay abreast of all the latest developments. You don’t have to spend sleepless nights thinking about whether you have overpaid or underpaid the employees and made any mistakes in the tax submissions. The payroll service provider takes away this liability from you.
Factors to Decide the Right Payroll Service
There are thousands of payroll service providers, each offering a range of unique services. However, it is important to understand that your choice of payroll service provider should be backed up by a thorough understanding of your business requirements, the credibility of your partner and the potential for long-term collaboration.
You can use the suggested list below to evaluate the right payroll service for your business:
Range of Features and Services
The first factor to consider is the range of solutions offered by the payroll service provider. Some service providers only offer attendance and calculation services, whereas others, such as Onpay, offer more comprehensive solutions, including ESS and a fully automated payroll process. You may not need all the solutions now, but it is important to plan for the future and choose the right partner from the onset.
You should select a payroll provider with a history of proven success, such as Paychex or Onpay. It is important to prioritize quality over cost in selecting an appropriate payroll service provider. A small cost saving can lead to bigger problems working with your partner.
Business Size and Type
The mechanism of recording attendance and generating payroll varies from industry to industry. You should preferably select a partner that specialized in your industry, or one that offers dedicated solution for your business type. If you run a very small business without many complexities, you can get away with a simpler solution, but if you employ different types of workers, an advanced solution may be necessary.
If you are choosing a payroll service that will be used by the employees, it is important to pick one that offers a user-friendly interface. Not all the employees are tech-savvy, which means the interface needs to be as simple as possible.
Price is, of course, a key consideration in every business decision. You need to perform a cost-benefit analysis to see if the price paid for the solution does not outweigh the expected benefits. However, in the case of a payroll service, the benefits are often more promising, and the cost remains to be nominal for most businesses.
Integration – Operations and Accounting Software
Integration with other software used by the business is often an important consideration, particularly if you want to minimize the manual work. You should evaluate if the payroll service can be integrated with your operations and accounting software. Some accounting software providers, such as QuickBooks, also offer a payroll service. You should preferably use the payroll service offered by your accounting software provider, unless you have a good reason not to.
The responsiveness of payroll service providers to customer complaints greatly varies. You would not want to choose a partner that takes days to respond, while your employees go on a strike for non-payment. Therefore, the customer support aspect should also be a key consideration in your search for the right service provider.
Payroll is a function that should best be outsourced in a small business. This saves your precious time and money and ensures that all of your payroll and tax calculations are accurate.
The decision should be backed up by thorough research as it is easy to make a wrong choice and face repercussions for a longer period. Do consider the cost, features, reputation, interface, integration and customer support of each service provider to arrive at the right choice. We recommend using only the best and proven companies, such as Paychex, Onpay or ADP.