When it’s time to drop everything and run payroll, even the most experienced small business owners can find themselves grinding their teeth. In fact, SCORE discovered that owners (and the people helping them) spend one to five hours on payroll every month. And even when they’re careful, 40 percent of small employers make a payroll mistake each year, resulting in average fines of $850.
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But that’s not gonna be you, right?
You’re good enough and you’re smart enough, and gosh darnit you’re gonna get payroll straight. When you set off down the path to payroll paradise, there are two ways to do it: You can sharpen your pencil and slip on your green visor, or you can find a good payroll service to automate parts of the process and free you up to focus on everything else your business needs.
When you take a step back, it’s easy to see how all those little payroll responsibilities can lead to errors: Payroll taxes have to be filed on time, deduction levels shift as the year goes on, and ongoing changes to state, federal, and local regulations can make it feel like the ground is moving under your feet (even when you’re not in earthquakey California).
A good payroll company can do a lot to help your business get it right.
How much do payroll services really cost?
For a lot of small businesses, the first question that likely springs to mind is: How much will it cost? Because there are different pricing structures, it’s not always easy to compare apples to apples. Most providers charge a flat monthly fee, plus an additional fee for each employee. Typically these fees start at around $5 to $10 per employee per month.
Be careful, because there can be some extra costs too.
Some payroll providers charge fees for things like:
- Initial setup
- Paying employees in multiple states
- Generating tax forms like W-2s and 1099s
- Tracking PTO
- Amending payrolls after you’ve made a clerical error
- Getting help with an IRS notice
Before you get started, outline everything you’re going to need from your provider so you can get a more realistic sense of how much payroll will cost. And be realistic about how likely you are to do things like amend your payroll. After all, we all make tpyos sometimes.
So what do payroll companies provide?
First of all, you get peace of mind. Those late night payroll runs, emergency calls to your accountant, and energizing (not!) visits to the IRS website will likely become a distant memory if you pick the right provider.
But the real reason to sign up for a payroll service is to take some of the workload off your shoulders. When you don’t have to think about FUTAs and SUIs, you can focus on all the other stuff that goes into running your business.
To keep your time (and your mind) free of all the payroll distractions, a good provider should:
- Be able to run payroll on your schedule
- Calculate taxes and withhold them from employee and contractor paychecks
- Deduct payments for benefits and wage garnishments
- Pay both employees and contractors
- Pay all your employment and payroll taxes
- File all your payroll tax forms
- Send year-end tax forms to employees and contractors
Sounds good, right?
Payroll companies also offer additional features (or integrations with other types of software) to help you go above and beyond simple payroll processing.
For example, some payroll services also:
- Track PTO requests
- Manage onboarding and tax documents like I-9s and W-4s
- Handle reimbursements, bonuses, and other payments
- Take care of workers’ comp
- Help administer benefits and 401(k) deductions
- Integrate payroll with accounting, time tracking, and other back office software
To make sure you’re getting everything you need, try putting together a wishlist of your specific needs before shopping around.
Support and migration
Because payroll never takes a vacation — and neither your employees nor the government are okay with errors — it’s crucial for any good payroll company to offer strong support when you have problems or questions.
Are you going to be able to get help when you need it? Are the people on the other end of the phone, chat, or email going get to the bottom of your state’s tax regulations?
And don’t forget the process of migration. It can seem like a small thing, but handing over the keys to payroll is a process that might test your team’s patience. Are you going to have to input all your employee information yourself? Is your payroll provider willing to help you migrate to their service or provide any resources to make it easier?
Since this can be the most stressful part of outsourcing payroll, you should make sure you know exactly what to expect up front.
Getting a peek inside your new payroll provider
If you just look at their websites, every payroll company is the best. But chances are that some will be better for you than others. To get a better sense of what’s going to work, take a look at online reviews. Thousands of small businesses have made this decision before you, so it’s worth looking into their experiences.
Read a mix of good and bad reviews with an eye toward how people like the features that matter most to you. Also try to get a sense of whether the people who are reviewing the software face challenges that are similar to yours. For example, if the reviewer is a restaurant owner, they may be concerned with things like reporting tips that might not apply to you if all your employees are salaried (or vice versa). You can also find reviews by professional reviewers who have good perspective into all the options available.
For example, you can check out Gusto’s reviews or search for other payroll companies on some of these sites:
Deciding on the right payroll company
So you know what you want, you’ve set some budget aside, you’ve done your research, and the next payday is bearing down on you. How do you make your decision?
If you’re still not sure, spend some time on providers’ websites to get a sense of each company’s personality and to really understand everything they can do for you. See how they respond to customer issues on social media. Check out their resource center to make sure it’s easy to find and that it appears to be comprehensive. Some providers even offer a free trial that lets you go in, kick the tires, and see if everything looks good before you take the plunge.
Good luck with your payroll shopping. If you get it right, you’ll be doing yourself a big favor in the long run (and saving money on aspirin for those late-night-number-crunching headaches)!
Here’s a little more about what we do if you think we might be able to help.