Do you need to outsource your company’s payroll? If YES, here is a detailed guide on how to find a perfect payroll service for a business and how much it cost.
A lot of businesses have been known to battle with payroll errors over the course of their lifetime. It has been discovered that the IRS penalizes about one out of every three business owners for payroll errors each year due to inappropriate filing of payroll taxes.
Even if mistakes weren’t so commonplace, doing your own payroll can still cost you in other ways. The valuable time and energy you spend figuring out how much money you have to give away could be spent actually making the said money, that is why so many businesses are looking out for help when it comes to their payroll services.
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What is a Payroll?
A payroll software is used to design, automate and manage the process of making employee payments. This process includes calculating the payments, withholding employee tax and depositing monthly payments to employees’ bank accounts, or any other way you choose to pay them.
Choosing the best payroll service for your needs can help you to reduce payroll errors to the barest minimum. Again, a good payroll service will, at the very least, get checks to both the IRS and your employees on time, while taking most of the work weight off your already stressed shoulders.
In this guide, we will cover everything you need to know about the perfect payroll service, what these services offer, how to choose one and what they cost.
Why You Need a Perfect Payroll Service?
There are a lot of reasons why you need to get a good payroll service for your business, and some of these reasons include;
- To help with payroll processing
With level of error being noted in payroll processing, a lot of business people do need help with their payroll services. Online payroll services automatically calculate how much employees should be paid each pay day. The systems account for wage rates, shift differentials, overtime, holiday pay and taxes as well as Social Security and benefit deductions all on its own.
- Direct payment delivery
Another job load a payroll service relieves you from is having to disburse payment or paychecks to your employees directly. A good payroll service will make payments to employees by direct deposit, prepaid debit cards or paper check, depending on what you prefer.
- File and pay payroll taxes
A good payroll service will also help you with deducting and withholding employee tax and file your tax reports. These services can withhold employee taxes, file quarterly payroll tax reports, and pay tax withholdings to the proper local, state, and federal agencies.
They also issue employee W-2 and 1099 forms at the end of the year. Some services offer an error-free guarantee. If a mistake is made, these payroll companies will correct the error and pay any fines or interest incurred.
- They give new employee alert
Keeping in mind that employers are always very busy and little details can always escape their memory thus leading to fines. A good payroll service would help you report new hires to the government on your behalf, thus relieving you of the burden.
- It can provide software Integrations for your business
A good payroll service should be able to integrate with a variety of payroll-related programs your business is already using, such as accounting software, time and attendance systems, and human resources software.
- Helps with employee time management
Many of these payroll services manage paid time off by tracking how many vacations and sick hours employees have earned and how much they’ve used. Some payroll solutions even facilitate the time off request and approval process.
- They provide payroll on the go
One good benefit your payroll service can give you is that it can enable you view your payroll on the go. Many systems offer mobile apps or mobile-friendly websites that let businesses manage and run payroll from smartphones or tablets. They equally provide detailed wage and labor reports which can provide a deeper look at how a business operates.
- You get a ton of work off your shoulders
The biggest benefit of online payroll services is that all the work – payroll calculations, payroll tax payments, year-end tax forms, etc. – is completed for you. With these systems, your payroll can typically be run in just minutes.
Characteristic Features Expected of a Perfect Payroll Service
When thinking of getting a payroll service for your business, you have to bear in mind that not all payroll providers offer the same level of service. But for your payroll service to serve you optimally, it has to have some certain features. Some of these features include;
a. Multiple payment options: One of the things you should expect from your payroll service if it is to serve you better is for it to have multiple payment options. Before you opt for the service, you should consider whether the service offers multiple pay options like direct deposit, paper checks or prepaid debit cards.
You should also see if the provider offers multiple wage rates, garnishment payments, paid-time-off management, workers’ compensation administration, unemployment insurance and detailed payroll reports.
b. Working cost: Running a business is expensive, so you need to use every avenue to save cost. So, when picking a payroll service for your business, you should be able to get one that offers you a reasonable cost. In addition to cost, you need to determine if a contract is required for the service.
Many services operate on a month-to-month basis with no long-term contracts, while others require yearly commitments. It is also important to factor in whether you are paying by month or pay period.
Depending on how often you run payroll, the type of structure you choose could have big cost implications. There is always something for everyone, which is why you should choose a software that best suits your budget and still has all the essential features.
c .User friendly: There is no point in getting a payroll service that would prove difficult for you and your staff to use. So, when looking out for the perfect payroll service for your business, endeavor to find one that is very easy to use. It should have an interface that allows you to run payroll and add employees into the system in a matter of minutes.
Spending hours trying to figure to how it works or always calling the help line in order to put you through doesn’t seem like a good idea. Rather, opt for one that will allow you pay your employees, send them payslips and automatically send the data to your accounting system in no time. For your payroll service to be considered user friendly, it has to have;
- An intuitive menu structure
- Legible text
- Clearly labeled buttons that tell you what to do (and what will happen when you press them).
- Colors that look lively
- A mobile-friendly site so you can run payroll wherever
- And most importantly, a simple payroll process
d. Able to integrate with other software apps: When looking to get the perfect payroll app, you should look out for one that is able to work with other business apps that you already use in your workplace like time and attendance systems and accounting software.
e. In-house control: A good payroll software requires no special expertise on your part, therefore you no longer have to hire outsiders to handle your payroll for you. You are not only saving time and money when using a payroll software, you have complete control of your financial information as well as your data confidentiality. So one characteristic you should look out for in your payroll system is if you are able to run it in-house.
f. Proven support systems: One thing you need to look out for in a payroll service is one that is able to provide your business with the necessary support when you need it. You should inquire about whether you will have a dedicated support representative who will always be your main point of contact.
g. Easy calculations: Small businesses spend a lot of time doing payroll every month. It requires accuracy to pay employees the right amount of money they have earned. Using a payroll software automates all these processes, and also eliminates the probability of error in calculations. With manual payroll system out of the way, the business owner or an account personnel can focus on other tasks. The process is productive and effective in saving time and money.
h. Free trial: Some payroll software offer a free trial so you can find your way around the solution at no cost. A free trial helps you know exactly what you want to purchase. This will allow you make a decision — if the software is right for you. This way, you are only stuck with the software until your subscription expires.
i. Added services: Some payroll providers offer a variety of additional services, such as human resources, employee self-service as well as benefits and retirement plan administration. You need to find out if your ideal payroll service offers these too, but you have to know that added service means added cost.
How to Choose a Perfect Payroll Service for your Business
Having known what to expect from the payroll service you want and the features you should look out for, it is now time to know how to make sure that you are choosing the perfect payroll service for you.
- Make your payroll list
Before shopping for a payroll provider, the first thing to do is to make a list of your current payroll needs. This is every service you need your payroll company to offer you. The majority of the services demanded by companies include:
- File state and federal payroll reports and taxes
- File and send employees their W-2s
- Direct deposit and check processing
- Pay 1099 contractors and file 1099s
- Off-cycle payroll runs
- Additional tax withholdings
- Add bonuses or commissions to a worker’s pay
After settling the main services you need for now, you may also need to create a payroll wishlist that you will need one year from now, three years from now, and five years from now. You should start considering if you want to offer any of these benefits in the future;
- Vacation and sick leave
- Health benefits
- Retirement plans
- Life and disability insurance
- Donation matching
- Commuter benefits, etc.
Ideally, a good payroll provider should give you the option to add services as your business expands. This gives you the flexibility to grow at your own pace and not pay for services you’re not using.
- Try it out
One way you can be thoroughly assured that the payroll service that you intend to take out is promising what it can deliver, is for you to take it out for a test drive. This is the only way you can know whether what you have been told is the truth or not.
How to go about this is to ask the company if they can give you a trial period. Many times, payroll companies have trial versions of their payroll software available for clients. This trial version should be able to answer all your questions.
When using the trial service or option, you must find out if;
- You can navigate the backend and go through all the steps on your own
- You can understand all the terminology that’s used—or do they provide easy explanations
- The system too robust for the size of your business. Are there features that don’t apply to a team of your size?
- There is there a live chat function. This feature is super useful if it’s your first time using payroll software.
- There are there help articles or a knowledge base that’s readily available
If the experience makes your head spin, you need to look for an option geared toward smaller companies.
But if the company you intend to choose does not offer a trial version, you do not have to just abandon the company. There are other ways to make your findings. The first thing to do is to find some of their clients and ask them some questions about the service they are being provided. You should ask them about responsiveness, accuracy and how this service compares to others they’ve used in the past.
Read a mix of good and bad reviews about the company with an eye toward how people like the features that matter most to you. Also try to get a sense of whether the people who are reviewing the software face challenges that are similar to yours.
For example, if the reviewer is a restaurant owner, they may be concerned with things like reporting tips that might not apply to you if all your employees are salaried (or vice versa). You can also find reviews by professional reviewers who have good perspective into all the options available.
- Check their customer service
Another thing that is recommended for you to do to enable you pick out the perfect payroll service is to call their customer service department to see who you get on the other line. In fact, you need to call all their lines to see if their customer service is fast and efficient.
The company should have an excellent customer service that ensures your queries are attended to, you are provide assistance and your needs are met. If you are left on hold for more than 30 minutes, walk away.
4. Note outage frequency
Online payroll services are cloud-based, which puts businesses at the mercy of the payroll provider to keep it up and running. Be sure to ask whether the provider has many outages and how often it is down for maintenance.
5. Request their price quote
Another thing you need to do when shopping for the perfect payroll service for your company is for you to ask for their price quotation. You need this price quotation to ensure you can afford the services you are being provided and that they are no hidden fees.
You should definitely get a price quote that includes fees for all of the services you mapped out. Get a quote for this year and next so if rates do change over time you’ll know whether or not the service will stay within your budget.
Questions You Need to Ask to Ensure That You are Not Getting Ripped Off
- How often are their tax tables updated for compliance?
- Do they have other clients in your industry?
- Can they integrate with your employee benefit offerings?
- How will they handle your business as your company grows?
- What type of security measures are in place to keep your company’s payroll data secure?
- How fast is turnaround?
- If the service makes a mistake, who is liable for those mistakes?
- How long does it take to fix a mistake?
- Are there additional charges for adding or changing employee payroll?
- Will the annual fees change or increase after one year?
- How often will you receive reports from the service?
- Do they offer retirement plans?
- Can they integrate with your accounting software?
- What back-office technology does the service use?
- What are the hours and means of customer service availability?
- Will you be assigned a rep or will you always be directed to someone new?
- Is there an additional cost to file taxes in multiple states?
- If data is re-entered, will you be able to review it before it goes through to payroll?
- How often will you hear from them?
How Much Does a Good Payroll Service Cost?
Payroll cost usually varies depending on what services you want and what you need them for. That notwithstanding, there is a standard cost structure that most payroll services follow. In the standard payment structure, there is a flat base fee that is charged per month or per pay period.
A typical payroll cost is a compendium of different fees accruable from the various payroll services offered to the client. The different services come with their own fees and they may include;
- Basic Payroll Outsourcing Costs
The first payroll service cost you have to note is the basic payroll outsourcing cost. Most payroll companies offer a basic package with monthly or per paycheck charges. The fee can range between $20 and $200 per month depending on factors like frequency of payroll, volume, tax requirements and service bundles.
Some providers also charge a separate per-paycheck fee of around $1-$2. Small businesses with a maximum of 10 employees usually pay more than bigger companies per employee because the payroll company offers discounts to larger companies.
- Software fees
If the payroll company you hired requires system access, you may be charged a one-time license fee, setup fee, maintenance costs and upgrades. Be mindful of these potential hidden fees and always ask the provider for transparency.
- Additional fees
Some payroll companies may only offer paycheck processing in their basic package. In such cases, they are likely to charge for add-on services, including direct deposits, check preparation and employee data entry. Also, emergency changes or updates to paychecks usually carry an extra charge.
- Payroll Tax Service Cost
Most payroll companies have tax filing in their basic plan, but most charge separately for tax service. This includes year-end tax preparation, such as W-2 printing, mailing and reporting. Charges may also apply to quarterly or monthly payroll tax preparations on top of annual tax processing. The cost can go as high as $50 and above per employee for every transaction. Extra fees may apply if you have employees in multiple states.
- Payroll Schedule
The more frequently you pay your employees, the more charges you will incur. If your cost depends on your pay frequency, you could end up spending more weekly or biweekly per employee than monthly as fewer payroll transactions occur with a monthly payroll.
For instance, for three employees, you may pay $36.85 weekly, $41.85 biweekly or $46.85 monthly. Online payroll services generally charge a base monthly fee, regardless of how frequently you pay your employees. To cut on costs, some companies would assign a monthly payroll schedule.
Depending on the company you go with, you could pay as low as $25 and as high as $159.57 monthly for an online company; additional fees may apply.
- Paycheck Delivery
Some companies still adhere to the traditional process of having paychecks distributed to employees instead of direct deposits. If you require this service, the payroll company may apply special fees outside of standard ground courier. The fees depend on various factors such as type of delivery, location, courier provider and state regulations. Take note too that paycheck delivery cost is directly proportional to your payroll frequency.
- Miscellaneous Payroll Outsourcing Costs
Always read the fine print when researching payroll companies. There may be other costs lumped under “miscellaneous” or buried in the terms. Here are common small charges that, when piled up, may cost you a whole lot:
- Revision fee may apply to correct wage errors caused by you; for example, you fail to update the provider of a pay increase or resigned employee.
- Setup fee for your new account.
- Fee for updating employee database like adding or removing employees from the list.
- Annual fees charged at every end of fiscal year for tax filing and reporting.
- Fee for on-demand payroll report.
- Your number of employees goes lower than the baseline for discounted rates.
These fees put together are what would inform how much you are going to be charged by your payroll service, so your payroll cost may not be entirely same with the next company.
To make sure you are not getting over-served, or under serves, experts suggest that you map out a list of services you expect your company will use over the course of a year. Ask yourself questions like how much you plan on growing, how many full-time, part-time and contract employees you’ll have on your payroll throughout the year, and if anyone is due for a raise or bonus.
Decide whether or not you’ll need a company that can handle different state and federal taxes. Do you need human resources services in addition to payroll? How much can you afford to pay for the service? Will you be offering employees 401(k)s and other deductions? How often do you want to issue paychecks?
If these questions have helped narrow down your options, it is recommended that you do an online comment search or look through consumer reports to make sure that the company you have in mind is not bogged down by tons of grievances coming from their clients, both old and new. This is in fact a red flag that you should take off.