Choosing a Payroll Service? How to Find the Best One for You

By Karina Fabian
Business.com / Financial Solutions / Last Modified: May 5, 2017

A payroll service can handle the gamut of pay-related tasks for your business, including benefits and taxes. Find out how to choose one.

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Payroll covers more than just making sure employees are paid. It also involves keeping compliant with laws and regulations, such as tax rules and the Affordable Care Act requirements. It includes workers' compensation, benefits and more. Thus, while hiring a payroll service can seem like a big investment, it has the potential to save your small business time, trouble and money in the long run.

When selecting a payroll company, you need to balance price against reputation and services offered. Sometimes, the biggest, most popular company is not the best fit for your business. Here are the most important steps to choose the best payroll service for you.

Editor's Note: Looking for a payroll service solution for your business? If you're looking for information to help you choose the one that's right for you, use the questionnaire below to have our sister site, BuyerZone, provide you with information from a variety of vendors for free:

 

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Basics

It knows the rules. A payroll company should understand not only federal law, but also your state and local regulations, plus any rules specific to your industry.

It can handle your business. This includes doing the following:

  • Paying full-time, part-time and freelance employees
  • Paying via direct deposit, check or prepaid card as you prefer
  • Tracking paid time off, vacation and sick days
  • Accounting for shift differentials, commissions, bonuses and overtime
  • Filing taxes according to the schedule required by law
  • Handling new hires and increasing its services as your company grows.

It is secure. Its systems should at least have bank-level encryption, which is 256-bit AES for now, TLS 1.1 or higher by June 2018. It also needs to follow security rules specific to your industry. Further, ask how it handles outages and how often it backs up information.

It offers excellent support. Errors in tax information can lead to delays and fines. Meanwhile, messing up an employee's pay can kill morale. Therefore, find a service with excellent support. In addition to accessing online tutorials on the software, you should be able to contact someone at least during your business hours. Further, you should have a dedicated agent who is familiar with your accounts for more detailed issues.

It files and pays promptly. You should be able to depend on this service to file your needed tax reports and other payroll-generated paperwork accurately and by deadline, as well as pay your employees the salaries they earned.

Its software integrates with other common programs. Most payroll services offer time and attendance tracking or can integrate with software that does this. The best also work with accounting, customer resource management, and point-of-sale or e-commerce software so you don't spend a lot of time putting information into a compatible format.

It has an employee portal. Employees should be able to access their accounts to print their pay stubs and copies of tax information as well as make simple changes, like to their contact information or dependents.

Its online portal is easy to use. This includes the employee portal. If the service offers a demo, try it out to see how well you can handle basic tasks; otherwise, check out tutorial videos and customer reviews.

It gives regular, understandable payroll reports. Ask to see a sample report to be sure it's done in a way that lets you get the information you need easily.

Extras

Workers' compensation: Many services offer workers' compensation insurance, which all businesses need by law. Some charge extra for this.

Benefits: Many services offer benefits packages, such as employee discount deals and retirement plans.

Mobile access: Most payroll services have mobile apps or mobile-friendly user portals so managers and employees can run payroll from a smartphone or tablet.

Tax guarantee: Many services guarantee their tax preparations, which means that, if there's an error, they'll fix it and pay the fines.

Price

Basic fees range from $20 to $200 a month, depending on features offered, plus $1 to $10 per employee or paid contract worker per pay period. Sometimes payroll services bundle extras that drive up the cost while never being used by the client. Be sure you are not paying for things you don't want or need.

Some services also charge additional fees, such as for setting up direct deposit or for mailing out paychecks themselves. Others charge for doing your end-of-year taxes. Some have a general annual fee. Be sure you ask about all fees over the course of a year, and what special tasks incur charges.

Another important thing to check for is price increases. Many times, a payroll service offers a discount for the first year. Therefore, when you price out services, ask for the estimates for two years. After all, you don't want to change services every year.

The best time to change payroll services is at the beginning of the year or the beginning of a quarter, giving you time to spin up before tax payments and reports are due. Regardless of when you hire the service, be sure to do your homework and get at least three estimates so that you can make the best decision for your employees and your business.

Image from mozakim/Shutterstock

Karina Fabian
Karina Fabian is a full-time writer and mother of four. By day, she writes reviews of business products and services for Top Ten Reviews and articles for Business.com, Business News Daily and Tom’s IT Pro. As a freelancer, she writes for Catholic educational sites and teaches writing skills. She has 17 published novels of science fiction and fantasy. Learn more at http://fabianspace.com.

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