Finances and Taxes

The Most Important Things to Consider When Choosing a Payroll Provider

Andi Smiles Small business financial consultant 
The Most Important Things to Consider When Choosing a Payroll Provider

Let’s be honest—most payroll companies seem like they’re doing the same thing. That’s why it’s SUPER overwhelming to figure out which company to go with. Beyond looking at the basic features and price tag, what else makes a payroll service stand out?

Over the years, I’ve helped many small business owners weigh the pros and cons of providers to find their perfect payroll software. In my years of research, I’ve looked at A LOT of providers and seen the good, the bad, and the ugly. After reviewing nearly every provider out there, I’ve learned that a few things can make or break your payroll experience.

Let’s walk through the four most important things to ask yourself when choosing a payroll provider for your small business.

Free small business payroll provider research guide.

Use this worksheet to find your dream payroll provider.
Payroll Company Research Worksheet

#1. Easy to use

Some payroll platforms look like they haven’t been updated since 2004. Think small, barely readable text, menus nested within menus, and the saddest, drabbiest grey you’ve ever seen.

Imagine logging into that twice a month.

But for real, it’s important that the platform you choose is user-friendly. Once upon a time I had a client whose payroll software was so difficult to navigate that we had to call tech support just to find a basic report. It took an hour to find what we were looking for—and he had to pay me for that time!

The bottomline is if you’re going to use a payroll service on an ongoing basis, it should be as easy as possible. That means it needs to have:

  • An intuitive menu structure.
  • Legible text.
  • Clearly labeled buttons that tell you what to do (and what will happen when you press them).
  • Colors that don’t make you feel like you’re going to the most boring convention ever.
  • A mobile-friendly site so you can run payroll wherever.
  • And most importantly, a simple payroll process.

The process should be so simple and intuitive that you have no question that you’re running payroll correctly. As a client said to me recently, “I love that I can log in and run payroll in five minutes. The first time I did it, I knew exactly what to fill in, what all the boxes meant, and it was easy enough that I didn’t worry about screwing it up.

That, my friends, is an easy payroll experience.

#2. Made for small business owners

Some payroll companies are geared towards accountants, and the language within the platform reflects that. Jargon. Technical language. Words you’ve never heard before. After your first payroll run, you can feel so overwhelmed that you never want to do it again.

The more confused you are about processing payroll, the more likely you are to make a mistake. Payroll mistakes aren’t easy to fix, which means you’ll either spend way too much time fixing it yourself or you’ll need to hire someone. Both of these are a drain on your resources.

Even if you’re planning to hire a bookkeeper, you still need to be able to access your data so you know what’s going on. No business owner should be completely helpless when it comes to accessing their financial information.

Before you invest in a payroll company, request a demo of the software. (Many times, the demo is already on the website.) Then, ask yourself:

  • Could you navigate the backend and go through all the steps on your own?
  • Do you understand all the terminology that’s used—or do they provide easy explanations?
  • Is the system too robust for the size of your business? Are there features that don’t apply to a team of your size?
  • Is there a live chat function? This feature is super useful if it’s your first time using payroll software.
  • Are there help articles or a knowledge base that’s readily available?

If the experience makes your head spin, you need to look for an option geared toward smaller companies.

#3. Grows with your business

Any time you invest in financial software, choose the option that will grow with your business. This means looking for the features you need right now and the features you’ll need one, three, and five years down the road (even if you’re not there yet).

Before shopping for a payroll provider, make a list of your current payroll needs. This is everything you need your payroll company to do right now. Most likely, your current list includes:

  • File and send employees their W-2s
  • Direct deposit and check processing
  • Pay 1099 contractors and file 1099s
  • Off-cycle payroll runs
  • Additional tax withholdings
  • Add bonuses or commissions to a worker’s pay

Then create your payroll wishlist one year from now, three years from now, and five years from now. Do you eventually want to offer any of these benefits?

  • Vacation and sick leave
  • Health benefits
  • Retirement plans
  • Life and disability insurance
  • Donation matching
  • Commuter benefits

Ideally, a payroll provider will give you the option to add services as your business expands. This gives you the flexibility to grow at your own pace and not pay for services you’re not using.

Simple time tracking that syncs with payroll.

#4. Cost

You’re probably thinking, “Why is cost the last thing on the list? Isn’t that the most important consideration?” And the answer is: Not as much as you might think.

Price does matter, but what’s more important is investing in software that you know how to use, feel good using, and that will grow with your business. It’s worth it to pay more for something that meets these requirements versus going with the cheapest option that is excruciating to use.

When researching payroll service fees, look at the:

  • Base fee: What is the minimum amount you’ll be billed?
  • Fee structure: Are you billed per payroll run or through a monthly flat fee? And if it’s per payroll run, how much will that cost you based on your payroll schedule?
  • Cost per employee: How much does it cost to add a new employee to payroll?
  • Cost per contractor: How much does it cost to add a new contractor to payroll?
  • Additional service fees: Cross-reference your current needs list. Is everything on this list included in the service fee? If not, what are the additional fees?

Some payroll providers also charge a one-time setup fee. Check what this fee includes and if the setup fee will offset your internal costs, like paying someone to migrate your data.

Are you fully committed to this payroll provider? If not, and there’s a setup fee, tread carefully. It would be a bummer to pay a setup fee and realize months later that you hate the experience and want to switch!

___________

Using these four questions as a guide will not only take the confusion out of choosing a payroll provider, it will also help you make a decision you’ll stick with. That means you get to focus on all the rad parts of being a business owner AND make running payroll the least of your worries.

Ready to switch payroll providers? Here’s a step-by-step guide.

What to Consider When Choosing a Small Business Payroll Provider Pinterest Image

Updated: November 1, 2019

Andi Smiles
Andi Smiles Andi is a small business financial consultant and coach who teaches business owners to take control of their finances. She’s helped hundreds of self-employed folx organize and understand their business finances, while also uncovering their emotional relationship with money.

Comments

  • Cathy D

    I found this extremely helpful. I chose my payroll provider several years ago now (I went with https://www.1099-etc.com/software/payroll/), but I wish I had something like this to guide me back then. Your strategy for breaking down the cost was especially great. Thanks!

    Reply
    • Gusto Editors

      Cathy, we’re glad it was so helpful!

      Reply

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