Commentary: How To...Choose a payroll services firm

Long Island Business News, Nov 9, 2007 by Bernadette Starzee

Your employees expect to be paid the right amount and on-time, come rain, sleet or natural disaster. So does the IRS. Because of the importance of keeping both happy, you need to carefully choose a payroll services firm - one with an outstanding record of accuracy and timeliness.

A good way to get a list of competent payroll services firms is to ask around. Because payroll services can be easily outsourced, and since it is relatively affordable to do so, many businesses decide the time-consuming, rules-intensive task is best done by an outside specialist. Ask trade association colleagues, friends at other businesses, clients and suppliers to whom they trust their payroll services, what options they choose and whether they're satisfied with the service they receive. Find out how often they have to have checks reprinted due to provider error. If possible, it's best to get recommendations from businesses of a similar size to yours in terms of employee count.

Once you have the names of a few providers, get price quotes. Payroll service firms will likely charge you a per-check rate, perhaps in addition to other flat fees. Because what is included in a provider's basic package can vary, be sure to get a detailed breakdown of what's included and what isn't. Naturally, the fewer checks you have printed, the lower your cost will be. As such, paying employees twice monthly is a more affordable option than doing a weekly payroll.

Depending on the options you choose, a payroll services firm can print and deliver checks, complete with automatic signatures; print W-2 forms; set up direct deposit; generate various reports; calculate employee withholding taxes; and file your federal and state payroll taxes for you. Ask the company if it can also handle local taxes.

Once you outsource payroll, don't think you can forget about it. After all, if there is an error in their paycheck, your employees will blame you, not the payroll services firm. Further, you are legally responsible for paying the correct taxes. Be sure to check the entire payroll the first few times the provider does it, and then spot-check it each time going forward. When you interview payroll firms, ask them about their accuracy rate and find out if they will pay penalties resulting from tax calculation errors they make.

Check with the Better Business Bureau to make sure there are no unresolved complaints on file against the company.

For each pay period, you will have to provide the firm with the necessary payroll data, such as hours worked for hourly workers or vacation and sick time that employees took.

Payroll data is typically submitted to the provider electronically. Find out what software you will need to use, and if it's user-friendly.

Further, ask payroll firms what report options are available for you and your employees. Can you access the system 24/7 to generate reports? Can your employees check electronically how many vacation days they have already taken?

Customer service is an important consideration. If errors are made, either by the provider or on your end, how quickly can paychecks be reprinted and delivered (or a direct-deposit account adjusted)? How easy is it to get someone on the phone who knows your account, in case you have urgent questions or problems?

Finally, because you will have to deal with the provider on a regular basis, choose someone you like and who will give your business the priority it deserves - come rain, sleet or natural disaster.

Bernadette Starzee can be reached at starzee@optonline.net.