How to evaluate a payroll service

An outline of points to consider when facing the critical decision of choosing a payroll service provider.

Before making a decision about managed payroll services, there are several variables to consider.

Complexity of payroll

First, evaluate the complexity of your payroll system. If your employees work varying amounts of hours each week or if you pay employees who reside in multiple states, it may make sense to hire a payroll service that is current on differences in state tax regulations.

Additional services needed

It is also important to review the support services offered by payroll providers. Often they can also assist you with benefits management and human resource-related activities. These services (i.e. retirement plans) are often pooled so that small companies can get better deals than if they had purchased the services independently.

Best way to transmit data

Even if you outsource your payroll, you will still need to be involved in its processing. Before each payday, you will need to let the service know of any changes that will affect the upcoming payroll. These changes can include information such as number of hours worked for hourly employees, changes in tax status, new hires, or terminations.

Therefore, the relationship you develop with your payroll service to transmit information is critical. Will you transmit payroll data by phone, fax, modem, or email? What type of schedule should you set up to allow the proper time to issue checks? It is also extremely important to keep a paper trail of all this information to provide a backup for any calculations conducted by the payroll service.

Format of management reports

Be clear on what type of management reports will be issued regarding your payroll data. Make sure they are easy to read, and that you understand all of the calculations being processed. Don't be afraid to offer suggestions that take into account how you work best, so the service can match your needs and keep your mind at ease.

The importance of references

Most important, interview the references of any payroll services company thoroughly. If you can, go on the recommendation of a colleague. The service needs to be ready and responsive to all of your questions and concerns, so be sure to ask other customers how they view the company's responsiveness rate and accuracy when dealing with problems.

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