Payroll Services for Small Business: 9 Important Considerations Before Signing Up

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As a small-business owner, you have to deal with a number of problems on a daily basis. Chances are you are handling most departments yourself and are deeply involved in every aspect of your business even if you have appointed leads for each vertical.

In such a compact scenario, it is difficult to hand over the reins of important tasks to an outsider. Sharing confidential business information with a third party is undoubtedly a risky thing to do. However, it is sometimes a sensible decision to outsource some of the tasks, especially when they do nothing to bring revenue to your business and take up a lot of time that could be put to more fruitful use.

One such task is payroll management. Taking caring of payroll for your business is a tedious, time-consuming task. It is wise to hand it over to a reliable payroll service provider who can take care of end-to-end issues like salary disbursement, tracking employee hours and tax filings. Yes, onboarding an external service provider will set you back a few bucks but the amount of time you save can be invested in other revenue-generating avenues.

Important Considerations before Signing Up

With more and more small-business owners outsourcing this task, there has been a surge in the presence of online payroll service providers. It’s natural to feel at sea when choosing an external service provider. It can be daunting to decide which vendor is right for you.

To make this process easier, here is a list of a few important factors you should keep in mind before you onboard an online payroll service provider.

Price

It is extremely important to check the prices offered by different service providers. Keep in mind, however that price shouldn’t be the only deciding factor; the features and services offered should ideally account for a larger portion of the decision.

A cheap but inefficient service provider will end up costing you a lot more than one that charges more but works smoothly. As a business-owner, when you are comparing the prices of different payroll service providers, look at the big picture instead of the cost in isolation.

Different payroll service providers charge differently, depending on the features they offer. Many vendors also try to extract more money out of you by adding unnecessary services to your account. Set a budget for payroll tasks and then explore your options to avoid overspending.

Services Offered

A payroll service provider offers a host of services, but you might not need all of them. Most small businesses need three primary services – salary disbursals, paying payroll taxes and filing tax forms on time to avoid hassles with the IRS. Yet, every business differs in their needs.

In addition to basic services, a service provider also offers time and attendance tracking, leave management, a portal for employees to update their profile, additional reporting like W forms, retirement plans and more.

You have to make sure you pay for only the services you require; it is a good idea to determine your requirements before approaching a provider.

Customer Support

Payroll is a complicated process, even in the most basic of businesses. Hence, the need for support is obvious and frequent. You don’t want a machine greeting you every time you try to connect to your service provider, or an automated message that puts you on hold for hours together.

While choosing your payroll service provider, you need to ensure the approachability of the representatives. The best option is to get yourself a dedicated account manager since service providers often handle multiple clients at once and find it difficult to offer timely assistance.

In the end, make sure the service provider is able to resolve your queries when they arise and not after the problem has escalated. Sometimes, the service provider assigns specific days per month when you can catch up and discuss your issues. While this might work for some small-scale clients, it is of utmost importance to clarify that you will need assistance as and when a problem arises.

Data Storage: Cloud vs. Local

When you are choosing an online payroll service provider, it is important to note whether the software they use is cloud-based or desktop-based. Online storage means the software is web-based and the data is stored by the provider in the cloud. There is no geographical restriction as you can access your account from anywhere and through any device. It also reduces the risk of losing your data since it is not stored on your device.

A desktop-based software stores all your data on your device and you can only access it through the system with a valid, pre-installed license. You need to backup your data regularly and spend a lot of time on maintenance in case of any crashes.

It is always better to go for online payroll service providers with cloud hosting to avoid any hassles of backups and data recovery. This option also gives you the freedom to use the portal on the go. However, in case your business is located somewhere with poor internet connection, a cloud-based portal makes more sense.

User-Friendliness

The point of signing up with an external payroll service provider is that you don’t have to spend your time dealing with the cumbersome process. Therefore, it is of utmost importance that you onboard a service provider that comes with an easy-to-use software.

The payroll software should be user-friendly and uncomplicated enough to get your employees trained to use it. It’s grueling to provide a long, extensive training session every time someone new uses the software. Ensuring ease of use will make the task of training a lot simpler and less time-consuming.

A cloud-based software solves many problems by allowing unrestricted access and no in-house IT maintenance.

Credibility

Letting an outsider in on your business’ data is definitely risky. When you take on a third-party payroll service provider, you give them access to your entire human resources budget.

Therefore, it is essential to choose a vendor you can rely on and has established a reputation as a trustworthy firm. Do not take a leap of faith; conducting thorough research before choosing your payroll service provider will reap good results later. You can approach the vendor’s existing and previous clients and dig further into their processes and client-handling mechanisms.

Most payroll service providers might handle multiple clients from the same industry. Hence, it becomes imperative to check their credibility to make sure no information is leaked to your competitors.

Reputation and Experience

This is an area where experience does matter. Shortlist service providers that have been in the industry for a long time and have a strong reputation, within your domain or outside.

Whether the service provider is a big or a small firm doesn’t matter, since its services are more important. It should be able to handle all your processes without any glitches, and have a robust record to prove it. Check with other clients to see the extent of its expertise in your domain so that you know whether it has the capability to deal with problems specific to your line of business.

Compatibility with Your Business

Every business runs differently; you might be running a restaurant, a manufacturing unit, or a consultancy with a large sales team. No matter the type of business, it is necessary for your payroll to be compatible with your processes and existing systems for human resources.

For example, you might be running some existing software for leave management or attendance tracking. Or you have a biometric system that needs to be integrated with the software. The payroll service provider should be able to integrate with these existing systems.

It should also be able to follow your way of disbursing payments. You might be paying your employees daily, weekly, monthly or via commission. The payroll software should be compatible with the business processes to avoid any legal discrepancies.

Maintenance

The online payroll service you use will be not be run by you; therefore, it is reasonable to ask the service provider about the maintenance of the software from their end.

Is the software regularly updated? If it is, will the data be synced with the new version seamlessly?

Are there any system failures causing the software to stop working? If yes, how frequently do the servers face this problem?

Remember, cloud-based portals are completely dependent on the IT of your service provider. Therefore, you should know if technological glitches occur in the program and how long it takes to resolve them.

Take a Demo Trial Run

You have conducted your research and shortlisted a few payroll service providers. Now, you should definitely take a demo before signing a contract. Use the service for a month to know the actual functioning of the entire process and how it fits with your business.

The trial will let you know how user-friendly the platform is and whether your employees can operate it without hassles. You will also see what features are included and what more you need. You can also check whether there are additional services you don’t need so that you can reduce them from your billing.

The Final Word

With a variety of options to choose from, picking the right payroll service provider can be a challenging task. However, it doesn’t have to be too complicated and burdensome. As a small-business owner, you should first have your priorities and requirements defined. Once you know what you are looking for, thoroughly look into existing service providers.

Keeping all these considerations in mind while onboarding a payroll service provider will definitely help you make the right decision.

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Join the conversation on Matt's case studies at CleverLeverage.com as he discovers and tests new ways to earn more income, learn alternative investment strategies to net >10%, maintain good health, and turn passions into online businesses.

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