How to Choose a Payroll Service for Your Business

Payroll is a nightmare. The service providers charge you for every little thing and it only gets worse the more employees you have. That’s why many businesses hire an in-house payroll specialist to take care of their HR needs, but this can get extremely expensive if your company has hundreds or thousands of people on its books. With so much out there and tons of options, how do new firms choose a payroll provider?

If you are looking for a payroll service, there is no need to worry. There are many options available to you that will fit your business and budget. Read more in detail here: do i need a payroll service for my small business.

When it comes to picking a payroll provider, you have a lot of alternatives. You can be looking at anything from online payroll software to local bookkeepers and accountants. Consider the size of your company and the complexity of its payroll procedures when choosing suppliers to examine. In this post, we’ll show you how to figure out what questions to ask in order to discover the greatest match for your business, as well as provide you an overview of the many sorts of solutions to explore.

1. Assess Your Company

Begin by determining:

• The amount of people you have, where they work, and how you pay them are all factors to consider.
• Whether you have HR employees or an employee that is solely responsible for payroll, or you will be doing it yourself,
• Your financial situation
• If you need benefits, as well as what other services or software you want to combine with your payroll service (time and attendance, accounting, employee scheduling)

Your Company’s Size

Regardless of which payroll solution you decide to adopt, the Your Company’s Size matters. You will run across payroll companies that claim they can handle payroll for any size company, from one employee to 100,000. And while this is true for some, it doesn’t mean they’re right for you.

The following are some basic guidelines:

• Employees aged 0 to 5: Because you’re a tiny firm with minimal regulation, you won’t have to worry about staying in Compliance. You should be able to use any of the payroll choices we mentioned. If you go with your accountant or bank, be sure you have workers’ compensation insurance and all of the necessary documentation filed with the state. Make sure you understand the fundamentals of payroll so you aren’t held liable for the errors of others.
• 6 to 50 people: You’re considered a small company, and certain states may have specific rules for things like sick leave. Your company is still small enough that free payroll software will suffice since you don’t need all of the bells and whistles. If you go this route, make sure you follow all applicable payroll regulations, both federal and state.
• Employees between 50 and 100: Even if you’re still a small company, you’ll need a payroll system that complies with all federal regulations, including the Family and Medical Leave Act (FMLA). A decent choice is to use all-in-one HR payroll software.
• Employees numbering in the hundreds: You’re on your way to becoming a medium-sized company, and you need to think about the cost of volume (i.e., a solution that charges a high rate per employee such as PEOs can get expensive quickly). You must follow all federal and state regulations. Because your company employs over 100 people and offers benefits, a human resources information system (HRIS) is required.

Size & Feature Considerations

Payroll services that can manage a variety of company sizes are usually more expensive and come with more features (like responding to garnishment notices). Companies with a small number of workers may want to use simpler services that focus just on paying employees and taxes.

A company that pays four part-time workers, for example, would not need to pay a premium for payroll services that provide competitive insurance rates. Benefits aren’t required by law until you have 50 full-time equivalent workers, so a small business wouldn’t need them in most circumstances.

Some services and software are just not designed to manage massive organizations. If you now have 50 workers but expect to have 150 within the next year, you don’t need to sign up for payroll software that can’t handle payroll for more than 100. Always keep in mind how many workers you already have and how many you expect to have in the future. Also, seek for internet evaluations from similar-sized businesses that have utilized payroll providers while doing your study.

Your Company’s Location

Payroll decision should take into account your company’s local and state locations, as well as remote or international employees:

• You have the easiest payroll problem if you just have one or a few sites in the same state. You have a wide range of alternatives.
• You’ll have to comply with extra requirements if you have several locations/remote workers in more than one state (or countries). To guarantee Compliance with federal, state, and local standards, you should use HR or payroll software. If you have employees in different nations, you’ll need international payroll services.

Employees who are paid on an hourly basis vs those who are paid on a salary basis

Next, while searching for payroll solutions, think about what sort of remuneration you provide your staff. Is it true that some of them are employees, while others are considered independent contractors?

Most payroll systems will work for you whether you have primarily part-time or full-time workers since they will need normal tax reporting. If you have a large number of independent contractors or 1099 workers, be sure your payroll software can pay them without extra fees.

If your company’s services include:

• Employees who work by the hour: Most likely, you’ll want to look at payroll software that includes a time-tracking component, such as QuickBooks Time (previously TSheets) with QuickBooks Payroll, or payroll software that can link with a time and attendance or time-tracking system.
• Employees who are paid a salary: This is the most straightforward scenario for payroll solutions, and we suggest payroll or HR software unless you have less than four workers, in which case you may use any payroll option, including DIY type programs.
• Combination of hourly and salaried workers: You’ll probably want to look into payroll software that allows you to pay both groups of employees on different pay schedules (i.e., salaried might be monthly or twice per month, whereas hourly might be biweekly).
• Only independent contractors are accepted: You should seek for companies that provide packages that are specifically tailored for this purpose. They’re frequently less expensive, particularly when it comes to online payroll software. You can get away with paying just $5 or $6 per contractor every month, and some won’t charge you anything if you don’t pay anybody for a month. Take a look at our top selections for contractor payroll services.

Within the company, there is expertise in payroll and human resources.

You may be wondering why, if you’re searching for a new payroll provider, you’d need to have any payroll or HR knowledge in your organization at all. The reality is that, even though you’ll be paying a firm to assist you with your payroll, you’ll still be held accountable for any errors. This is something you should think about before choosing a service provider.

If no one knows anything about payroll or HR, using DIY payroll software isn’t the greatest solution. You may be able to guarantee that your workers get paid, but you may not be aware of how much tax to withhold or when to submit to the IRS and other taxing authorities.

Budget

Most company choices are driven by budget, and you should keep this in mind when choosing a payroll service. Most services are billed on a monthly basis, so figure out how much you can afford. I suggest checking it out on a yearly basis as well; some firms charge extra for year-end tax reports.

Keep in mind that when your workforce grows, so will your payroll service prices. However, if your staff count falls inside the same price category, several services charge the same amount. Assume you have 20 employees and the supplier charges $40 per employee for businesses with 20 to 30 employees. Getting as close to 30 workers as feasible will optimize value and lock in the rate (without going over, of course.)

Finally, keep add-ons in mind. These are extra features that aren’t included in the plan you’ve chosen. They are expensive and may significantly increase your bills. Make careful to add up all of your expenses by month and year so you can make a fair comparison across suppliers.

Benefits

If your company wants to provide benefits or already does, be sure the payroll services you’re considering offer in-house solutions. Some employers don’t provide benefits at all, but will process deductions if you sign up for them via a third-party supplier. Because you’ll have to handle each component in multiple systems if you don’t have a benefits option, your payroll will be more difficult. If you wish to give benefits, I suggest looking at suppliers who already provide benefits as an add-on to their payroll software.

Integrations with Payroll Software

You’ll need to keep these in mind if you’re using or planning to use software that you’d want to link to your payroll software. Make a list so you may ask a representative about them or look them up on the service’s website. If you can download data into a spreadsheet format, many online payroll providers will enable you to import data from any program. Some systems feature automatic integrations that link the systems with a single click.

Accounting, employee scheduling, Software for tracking time and attendance, and point-of-sale (POS) software are some of the most common payroll connectors to explore. The more staff you have and the less time you have, the more likely you are to gain from software integration.

Software for tracking time and attendance

While time monitoring software isn’t required, it might be useful, particularly if your company has more than ten workers. If you pay even one person by the hour, you’ll need to keep track of their hours. You may provide these hours through email or even phone them in with certain services. Others have time tracking incorporated into their software, so all you have to do is input the hours; but, as your business grows, this may become difficult.

If you decide you’d rather automate this process, Software for tracking time and attendance would be your best bet. It’ll shift the burden of documenting work hours (via clocking in and out) to the employees, and all you have to do is review and approve them. If the time and attendance system integrates with your payroll software, all information will transfer electronically, such as employee paycheck calculations.

2. Narrow Your Options for Payroll Services

When it comes to choosing a payroll provider, here’s a quick rundown of the four primary options.

Online payroll software is a system that allows you to handle your payroll, or parts of it, entirely online, including paychecks and payroll taxes (payments and filing). The finest payroll software offers full-service payroll alternatives, which include processing your payroll and taxes as well as a guarantee to repay any penalties you may incur as a result of their errors. You’ll also generally have access to a team of experts that can help you with setup, Compliance queries, and one-time difficulties. You can locate some DIY plan alternatives that will assist you with computations, but you will be responsible for paying and filing your taxes on your own.

While you’re doing your homework, you may try out payroll software for free. Sign up for a free 30-day trial of Gusto. It will allow you to examine how a software system handles automated payroll, tax filing and payments, and even benefits. It’s inexpensive for one employee for $39 per month (lowest plan) and includes setup assistance.

Gusto is a great place to visit.

When a company already has a bookkeeper keeping their financial records in order, bookkeepers are an easy option. The amount of payroll expertise of the bookkeeper is crucial to consider. Some are Compliance specialists who remain up to date on federal and state payroll regulations that control how workers and taxes should be paid; they may give a guarantee to cover any fines that emerge, but you’ll want to double-check. Others are more familiar with the financial aspect of payroll, computations, payments, and record-keeping; these bookkeepers can guarantee your workers are paid, but they may run into legal issues along the way.

Professional employment organizations (PEOs) are businesses that collaborate with you to hire your employees. While you conduct day-to-day operations, the PEO takes care of payments, taxes, and deductions, as well as ensuring that you don’t violate any payroll rules. A PEO could be an excellent alternative if you’re passed the mom-and-pop stage and need to make your workplace more appealing with competitive benefit options—like insurance—and more established processes/policies.

Although they are more expensive than other options such as software or bookkeeping services, you can get much better rates for your employees because they enroll your employees in a pool that includes all of their clients’ employees, allowing them to offer large group benefit rates that you wouldn’t be able to get otherwise.

Companies that handle payroll at a physical facility near you are known as local payroll services. Because they’re local, you’ll be able to meet with their payroll professionals in person and may even be allocated a single point of contact at no additional fee—some online payroll solutions demand a premium for that level of personalisation. Depending on the firm, they provide different services. Even so, you should be able to remove the bulk of payroll obligations off your plate entirely, with the exception of maybe completing time sheets (if you don’t use a time and attendance system).

If you decide that local payroll services aren’t right for your company—they may be more costly than online providers and don’t always deliver as much value for your money, apart from the human experience—take a look at our list of the top payroll services for additional information.

You probably have a good sense of what will and won’t work for you at this point. You may rule out bookkeepers and PEOs if you don’t want to see someone in person or work with a co-employer. Make a list of the providers you’re still thinking about.

3. Research & Compare Payroll Providers & Decide Which Is Right for You

The next step is to do research and evaluate payroll service providers depending on the services you want. I propose making a chart that compares and contrasts the suppliers who pique your curiosity. This will make it easy for you to compare and contrast each service provider.

Start by Using Our Payroll Service Research & Comparison Data:The 6 Best ADP Competitors7 Best Gusto Competitors & Alternatives6 Top Zenefits Competitors for 2021Paychex vs ADP vs Gusto: Pricing, Features & What’s BestGusto vs Justworks: What We Recommend and WhyGusto vs QuickBooks Payroll: Which Is Best for 2021Gusto vs Zenefits: Which is BestRippling vs Zenefits: Which Is Best for Your Small Business?Rippling vs Gusto: Who’s Best for Payroll in 2021Rippling vs Paychex: Which One Is the Right HR Solution for You?Paychex vs QuickBooks Payroll: Price, Features & What’s Best in 2021QuickBooks Payroll vs ADP

Other Things to Think About When Choosing a Payroll Service

Though the amount of workers you have, where they work, and the sorts of jobs they have all play a role in selecting a payroll solution, there are a few more aspects to consider:

Compliance

When you start hiring employees, you’ll need to keep track of workers’ compensation, payroll taxes, and other compliance concerns. If you’re a company owner who merely wants to make sure everything is in order, HR software or payroll software is a good option. If you use a payroll provider like Gusto (see our review), you can buy and set up workers’ compensation coverage directly from the software.

You may acquire workers’ compensation on the private market or via a broker if you want to monitor expenses yourself. Remember that, unlike an HR or payroll software supplier, your accountant and bank are unlikely to guarantee compliance.

Time Off & Leave Tracking

If you give paid time off or sick leave, or just need to monitor absences, you’ll need a software solution that enables you do so, similar to time tracking. This option will save you time and money by reducing paperwork while also giving you information into your employees and prospective hiring/firing choices.

Customer Feedback

Customer Feedback are an essential part of shopping for payroll services. The best ones are on third-party sites. They’re usually unbiased and show both the pros and cons. I recommend giving extra weight to those that have businesses in your industry and/or a similar number of employees, so you get a better preview on the experience you are likely to have with the service. Expert payroll reviews are also essential.

Conclusion

There are numerous payroll service options for small businesses, but they’re not a one-size fits all solution. You should choose the best one for your business based on the features you need and Your financial situation. Be sure to differentiate wants versus needs and factor in any major business changes (size, location) you anticipate happening within the next five years.

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