Should You Pick the Cheapest Payroll Service?

Do you know what’s cheaper than payroll services? Payroll software. If you find that even the cheapest payroll services are bleeding your wallet dry, payroll software may be for you. You can manage, organize and compute your employees’ payments with this software. It holds all your payment records and is more affordable than payroll services.

Benefits of payroll software

Payroll apps automatically calculate taxes based on state and federal regulations. The software also manages deductions and calculates the taxes for payroll, Social Security and Medicare.

As an employer, you want to avoid violations and fees. Payroll software helps you electronically file W-2, W-4, 1099, 1095 and any other payroll forms you’ll need for your business.

Payroll software gives you and your team more payroll management freedom. You can address mistakes quickly without going through someone else. You can monitor your information from your phone. No middleman or third-party user means fewer people have access to your company’s private information. It’s also easy to calculate bonuses and PTO and to automate end-of-year reports.

A bookkeeping service does what an in-house bookkeeper or accountant would do. This service handles your transaction coding, accounts payable, accounts receivable, payroll and financial reports.

How to choose the right bookkeeping service

Before you pay for a bookkeeping or accounting service, inquire about the company’s payment structure. Are there annual fees? How long does it take to process your company’s data? How much experience does the company have in employment law compliance and how often will someone from the company check in with you? With an outsourced service, you may not have as much interaction or communication with the company as you’d like, so it’s important to understand what you are getting into before you decide to work with one.

A payroll processing company handles your payment of wages to your employees by providing payroll and HR operations management.

How to choose the best payroll processing processor

Do your research on a payroll company before hiring it to manage your company’s data, said Rick Fish, a payroll professional certified by the American Payroll Association. Ask for references. Remember your company’s needs and evaluate whether the payroll provider matches your expectations. Look into the company’s credentials and see if it has experience working with a company like yours, Fish said.

To avoid using the wrong payroll processing company, there are several things you should make sure the company manages and offers. At the very least, the company should run and calculate payroll for each pay period automatically. Inquire about the level of contact you’ll have with the payroll data and what the process of gaining access to your data is like. Does it take a couple of business days? Are there many forms to fill out or steps to take beforehand?

Check if the company offers tax filing services, such as managing deductions and W-2 and 1099 forms for employees. Does the system flag issues and how does the company notify you of those issues? Does it send alerts for employee benefits eligibility or overtime?

“Make sure you have a way of confirming your taxes are being filed [in a] timely [manner],” said Alexia Matak, president of Payroll Experts.

Matak also encourages business owners to find out who is liable for payroll errors, because it’s usually themselves. “Be careful of companies that say, ‘We’re taking full responsibility,’ because payroll taxes are the biggest liability.”

Analysis reports are a good way to get updates and information on your company. It is also important to have the function of PTO requests and a web-based system so you can check in when you want.

It’s good to get references for your prospective payroll providers before hiring one. You should also take advantage of free trials so you know what to expect and can assess the service’s reliability before you pay.

Understanding the service your payroll processing company offers is key to saving money. Asking the right questions will help you avoid paying added fees later.

Many United States businesses outsource their payroll responsibilities to payroll processing companies. Here are four of the benefits payroll processing companies may offer.

Savings

A payroll processing company shifts some of the administrative weight off your shoulders. Payroll sometimes needs to be reviewed more than once, so outsourcing this task can save you time and money. Instead of spending funds and effort on calculating wages; printing, signing and sending checks; and preparing and paying payroll taxes, you can hire a payroll company to handle all that for you. This gives you more time to work on your actual business operations.

In addition to being a timesaver, outsourcing is a safer option. Payroll processing companies have features like backup systems and multiple servers to keep your company’s information secure.

Compliance with tax laws

Keeping up with compliance can be a pain, especially with payroll tax laws changing constantly. With a payroll processing company by your side, there is no need to keep track of those regulations because your provider does it for you. As a result, you maintain compliance with laws and avoid violations and fees.

Feature flexibility

Some features of affordable payroll processing companies allow you to add payroll services through your accounting software. You can also choose how much service you want based on your budget and business — full-service or self-service payroll or anything in between.

Automated payments

Same-day direct deposit is another service payroll companies offer. However, Fish warns employers not to get swept up in the “same-day pay” craze if it’s not something you need. Some companies also provide flexible payment options, such as automatic payroll processing for salaried and hourly employees and varied payment schedules like weekly, biweekly and monthly. They can also set up automatic adjustments for tips, child support or other court-ordered deductions.

Vendors with a one-size-fits-all pricing system do not consider your company’s size or specific needs in the price. You might not need all the services they provide in their base plans, which could feel like a waste of money. See if you can cherry-pick what you like and buy what works best for you.

The tricky issue when dealing with a payroll company is that it might offer a low price, but only at first. Before you partner with the service, do your research to avoid sneaky added fees. Sometimes prices are subject to change after a year, so look out for that.

Regardless of the service, a payroll processing company is a separate entity that handles your company’s information. For the same reason, if you need to correct a payroll error, your payroll processing company may not respond as quickly as you like.

The best PEOs work specifically with small and midsize companies. They manage payroll taxes, HR operations and benefits through a co-employment model. Your employees will be on the PEO’s books but still under your management. If you need to outsource other HR tasks, such as administering benefits, a PEO might be a cost-saving option for you. If the company you use also offers payroll, it may be convenient and cost-effective to add these services to the ones it already performs for your business.

A full-service payroll company is typically larger and operates almost like a tech company, said George Kocher, CEO of Brand North. Processing companies can offer a platform for time tracking and time-off requests through easy-to-use smartphone applications.

“Because of their size, they also have strategic relationships,” Kocher told business.com. “For instance, they might be able to help you create your HR handbook and have free access to online hiring platforms or even attorney services.”

Although full-service payroll companies are usually larger, they can provide dedicated payroll specialists to assist you. A full payroll service also provides flexibility for submitting payroll information. You often have the option of submitting it by phone or email at any time of the day. Many companies offer automated tax filing and some even give you access to other HR and benefits services.

A full-service payroll company has much to offer, but if you’re a small business, it might cost more than you have at the moment. You should also be on the lookout for hidden charges like setup or account maintenance fees.

Cost isn’t the only drawback of using a full-service payroll company. If the company doesn’t assign a payroll specialist to your account, your working relationship can feel impersonal. Liability for payroll tax filing errors may also be a problem. Some full-service payroll companies take responsibility on your behalf but some do not. This means you could be hit with fees for mistakes your payroll provider makes.

When choosing between cheap and full-service payroll, assess what you need as a company. A full-service payroll company may have everything you need and more but that can be costly compared to a free or cheap payroll service that’s a bit more limited. The best way to decide is to weigh what you need against what you want but can do without.

Plan on testing out a service if a free trial is available. When using the trial, ask yourself the following questions:

• Is it easy to navigate?
• Does it offer tax services?
• What self-help resources are available on the company’s website?
• Is its tax service management as complete as you’d like?