Choosing the Right Payroll Provider

Summer is a perfect time to hire new employees, as many individuals are looking to either change jobs or start a new opportunity. Once you have hired your employees, should you be taking the time to manage payroll internally or hire an external payroll service provider?

Whether your business is small or large, calculating employee hours, benefits, and withholdings is not a good use of your time. Some business owners have someone on staff to manage payroll and ensure you are staying compliant with tax laws, but many businesses today are using external payroll service providers to take care of these important tasks. So, which payroll provider is right for your company?

We understand that hiring your first employee is a significant stage in any business, and at Critical Connexion, we have helped our clients generate client leads to find qualified and experienced employees. But once they are hired, you have to pay them! Since we position our own clients in this capacity with our top-notch business management and accounting services, we thought this would be a perfect topic for this month’s blog.

Managing payroll and staying compliant with tax and labor laws are essential tasks for every company. And, there are key factors to understand when choosing the right service provider for these important tasks.

We are going to discuss what payroll service providers are, what to look for and the non-negotiable features of a payroll service provider.

What is a Payroll Service Provider?

The main role of a payroll service provider is to give you the peace of mind that you are able to pay your employees, and the local, state, and federal government, correctly, accurately, and on time.

Although many businesses take care of these functions internally, the National Small Business Association found that nearly 60% of businesses with more than five employees are using an external payroll service provider. That’s more than half of the companies out there today that are using payroll service providers to ensure their employees are paid and they are compliant with their local, state, and federal government!

At Critical Connexion, we have helped our clients streamline their payroll operations to ensure they are meeting the needs of their employees and the government. This means partnering with our clients and analyzing their business and software needs, integration capabilities, and of course – pricing. By first assessing a business and then using advanced payroll software that is fast, accurate, and secure, we can automate what would otherwise be complex financial tasks to save time and avoid costly errors.

Those are really the two main benefits of choosing the right payroll provider: they can save your time so that you can focus on what matters (such as growing your company!), and they can help reduce risking financial and compliance errors.

As you can see, a payroll service provider goes well beyond simply completing the basic payroll calculations. They will handle all of your financial record keeping, deposits and withdrawals, salary payments and wage calculations, withholdings, and garnishments, and your local, state, and federal tax filing.

The benefits of using a payroll service provider include the following:

Saves you time: As we noted above, using a payroll service provider will save you the time of manually processing payroll or having to use complicated financial software. In fact, it could save you up to 10 hours a day – or 120 hours a year – that may be needed to complete tax reporting, compliance issues, and employee payments correctly. That way, you and your entire team are freed up to take on more strategic responsibilities to grow your company.
Helps you stay compliant with payroll and labor laws: Are you acclimated with the latest payroll and labor laws set by the government? The answer is probably no, which is why using a payroll service provider ensures you are in compliance with these laws and avoid potentially large penalties. Leave these responsibilities to the experts who understand these ever-changing laws. A critical capability for any payroll service provider is the ability to establish payroll accounts by state. Given the varying reporting requirements across states, the setup process can be time-consuming and complex. Therefore, the provider should have a robust infrastructure that enables a streamlined, efficient process for both enrolling and terminating state agency accounts.
Reduces financial errors: Since a payroll service provider handles your local, state, and federal tax filings, you can rest assured they will be done correctly. Payroll service providers use secure automated systems to ensure accuracy and compliance so that you avoid any senseless tax penalties.
Improves your security: Many companies find their financial data to be vulnerable when they are manually completing payroll or using an insecure payroll software program. Payroll service providers will use the most state-of-the art encryption software and other security measures to ensure your financial data is secure. If they aren’t using these measures, don’t use them!
Improves your employee relationships: There are benefits for your employees as well when you use a payroll service provider, such as direct deposit functions, self-service portals, mobile banking, and detailed pay stubs so they are paid fast and know where their salaries are going each pay period.

These are just a few of the benefits you will get from using an external payroll provider. But, how do you actually choose the right one?

How to Choose a Payroll Provider

You now know why you should choose a payroll provider, but how do you choose the right one? First, let’s look at five steps you should take when first choosing a payroll provider:

Outline and assess your company’s needs: What is the main issue with your current payroll process? Is it the time it takes to pay your employees, are you struggling with staying compliant with regulations, or is your software outdated? Knowing your company’s main “pain points” will help you better assess the type of payroll provider you need for your specific company. This also includes assessing the number of employees you have, your payroll frequency, and additional services you may need. These will all help you choose the right payroll provider.
Do your research: The beautiful thing about the Internet is that it provides you with the specialties of each company, user reviews, testimonials, and even case studies. For example, we provide case studies on our website so that entertainment and technology companies can hear directly from the clients we have helped. This is a great way to rank payroll providers that have strong reputations.
Set up a meeting and request a demonstration: You will want to meet with the payroll provider – whether it is face-to-face, Microsoft Teams, or Zoom – and make sure to request a demonstration of their software to ensure it is user-friendly, integrates with your current payroll software, and meets your company’s needs. When you do meet for the first time, you will want to ask what is included in the base price (see #4), how they ensure you are compliant with your specific tax and labor laws, and what security measures they will use to ensure your data is protected.
Compare costs: Although you should never focus solely on cost, as choosing the cheapest payroll provider may mean you get what you pay for, you should have an understanding of their pricing structures and any hidden fees. Evaluate both the price tags and what is included in those price tags – tax filing, year-end reporting, direct deposit features, etc.
Find out if they can grow with your business: Yes, you will also want to check scalability, which means the payroll service provider can grow with your business. Whether you plan on adding more employees or adding new geographic regions, the payroll service provider should be acclimated to these changes.

Not only will you want to take the five steps above, but you will want to look for the following key features in your payroll provider:

Automation of payroll processing and tax calculations, and integrations with current software tools to save you from having to manually consolidate financial records.
Managing your paid time off (PTO) such as vacation time, medical or parental leave, and both sick and personal days.
Tax and labor law compliance expertise and management to ensure your business stays complaint.
Data security to protect your payroll data through encryption, secure servers, and audits.
Employee services that offers direct deposit, benefits integration like managing health insurance and retirement plans, and mobile access to manage their pay and benefits, and secure portals.
Responsive and knowledgeable customer support for you and your team – hopefully 24/7!

As you can see, choosing a payroll provider goes well beyond finding someone to simply ensure your employees are paid. You can start with a quick Google search for payroll providers, but you’ll want to then take the steps we’ve discussed to ensure you are guided correctly to your final choice.

About Critical Connexion:

Critical Connexion is a distinguished business management & consulting firm that focuses on leveraging a foundation of leading finance, HR management, strategic sourcing, risk & operations experts to accelerate brand success for clients.

We specialize in navigating the evolving landscape of corporate growth by adeptly addressing changing systems, processes, and people requirements. Recognizing the substantial nature of technology and changing business needs, we ensure that these resources are directed with foresight and expertise. We are your extended partners for business growth, scaling seamlessly and brand elevation.

Contact Us:
Ph: 213-798-6676
Email: info@criticalconnexion.com