You have decided that hiring a payroll service is a good idea. You have realized that doing payroll yourself does not add anything to your business that your customers care about. That’s why you’re in business, right? To earn a better living, by serving the needs of your customers. That’s why you’d rather sign the front of the check than the back. You realize that 100% of your time and your energy need to go to adding value to your customer’s experience of your business. If you’ve ever read The E-Myth, you know it is better to work ON your business than IN your business. The rest gets eliminated or outsourced.
First, find out a few things about the service because there are several variations of what makes a payroll service. They fall into two broad categories: full service or online. Full service means you just send them your employee’s hours and they do the rest. Warning: Most “full” services won’t do local taxes; you’re on your own. Most “full” services are not any help on how to get the payroll into your accounting system. Then there is online.
Online means they are giving you access to their software and you are really doing most of the work. I don’t think this saves much effort by you and they charge only a little less. It’s great for them! This is why the big push by most places to get you to go online; it saves them having to do the work. If the idea is to save you time and effort, this fails the test.
You will want to see what their procedures are for input, funding, and output. Input- how do you transmit the hours to them, by phone call, fax, email, spreadsheet? I’ve seen some places that required 10 pages faxed each time because each employee’s entire roster of information is on the faxing form, their pay rate, address, social security number, etc. Not exactly very secure or confidential! If you are trying to keep pay information confidential within your business, this is not the way to do it!
How is the payroll funded? Most services take custody (impound) your money for wages and taxes (regardless of when they are due to be paid) and keep them in their bank account. You should know that ultimately YOU are always responsible for paying the payroll taxes. The big services are audited and bonded and are completely safe. Ask how the money is handled.For more information, go to http://www.dcxcapital.com/why-should-you-outsource-payroll/
Output – what exactly do you get? Ask to see sample reports that come with the paychecks. Is it 15 pages of mumbo-jumbo? Is it understandable if you don’t happen to be a CPA? Now, how exactly do you get the payroll “booked” into your accounting system? What about special reports, do they charge extra, and whom do you call for those? Do they do local taxes? (The withholding AND the quarterly returns?)
Finally, do they mail you the paycheck package, how much? Or, do you have to go pick it up? Will they deliver? (Most won’t). Alternatively, do you have to print out all your own checks because you chose the online payroll?
These are the major considerations/questions to ask. Oh, one more thing. In general, are they nice people to deal with? This can be hard to find out. Ask around and find people who have dealt with the company you are considering. Some payroll services are really horrible to have to deal with; they blame you in every case if an error occurred, they may be hard to reach by phone, just voicemail, and you don’t actually know if they got your instructions/messages. I just added a client who switched from a local service and as a parting gift, the old payroll service mailed him a $250+ bill saying they had reviewed large his account and realized they hadn’t charged him for certain things in the past. Wow! Nice people! Check the reputation if you can, it’s very important.