If you are thinking about outsourcing payroll functions at your organization, here are a few tips about on choosing a payroll service provider from Caron Beesley, an experienced small business owner and contributor to Small Business Administration’s (SBA) website.
For a Limited Time receive a
FREE Compensation Market Analysis Report! Find out how much you should be paying to attract and retain the best applicants and employees, with
customized information for your industry, location, and job.
Get Your Report Now!In an SBA blog, Beesley notes that payroll can be a cost-effective business strategy, and it’s the first function many small business owners look to contract out. Choosing the right payroll provider is an important step for organizations looking to go down this road.
There are many ways to find provider, but Beesley believes referrals are the best way to go. She urges employers to talk to other business owners, local Small Business Development Centers, or an accountant. The next step is to consider whether vendors address the reporting needs of small businesses in your industry and state.
Finally, it’s important to interview vendors. Beesley suggests asking candidates the following questions:
- Professional qualifications – Such as licenses, bonds and experience.
- Customer service – Who will be doing the work? What are their response times? Can you communicate with them regularly?
- Payroll tax processing – Will they file your payroll taxes for you? Will they assume penalties for incorrect filing? Do they handle EFTPS payments on your behalf? Can they help with local tax filing?
- Fees and charges –You can expect to pay up to $2.00 per payroll check, plus a base account fee. Add-on charges can also apply and include features such as direct deposit, support for employees in multiple states, etc. It’s worth having a good idea upfront of the services you need so that you can negotiate a flat fee and avoid expensive add-ons.
- Payroll communication – Find out how payroll data is given to the provider each pay period. Is it secure?
- Ask for references and for permission to contact them.
Point to remember. The IRS clearly states that employers who outsource some or all of their payroll functions are still responsible for the deposit and payment of federal tax liabilities. Even though the employer may forward the tax amounts to the third-party to make the tax deposits, the employer is the responsible party.
Beesley’s blog post is available at SBA.gov.