Outsourcing payroll can be a big step. A company that has relied on in-house operations to handle payroll from the start suddenly finds itself having to turn those functions over to a third party. As with anything in business, choosing the right provider is key to a successful transition.
So how do you do it? Well, management has to look at the standard things like provider reputation, the quality of their solution, the availability payroll software, etc. But it helps to dig a little deeper. It helps when management sits down and asks some very thoughtful questions that require looking a bit into the future.
How is the company positioned for growth?
Payroll providers usually charge clients under one of two business models: a percentage of the total payroll being processed each cycle, or a flat fee based on the number of employees on the payroll. Both models are influenced by company growth.
As your company grows, you will undoubtedly be adding more employees and increasing your total payroll. A company positioned for growth should expect higher payroll costs as that growth occurs. This is where pricing is important. As long as cost increases are commensurate with your growth, all is well.
Do we rely heavily on contractors?
Worker classification is always a problem when it comes to payroll. Workers classified as independent contractors are paid straight-up without regard to withholding or taxes. Employees on the payroll are a different matter. The employer is responsible for withholding and paying the employee’s share of federal and state taxes.
Payroll providers have to be able to properly distinguish between different worker classifications. They also have to be reliable when it comes to reporting. Otherwise, one error here or there could create a plethora of problems for the employer.
Do we have plans for multi-state operations?
Are you running a business with hopes of expanding beyond state borders? Be prepared for additional payroll challenges as that expansion happens. For example, states have different tax rates. Some states have reciprocal tax agreements with their neighbors while others do not. You need a payroll provider capable of handling interstate issues competently.
Where do we stand with benefits?
Yet another consideration is employee benefit packages. Perhaps your company doesn’t offer any now, but you’d like to in the future. Consider working with a payroll provider that offers benefits administration along with payroll processing.
BenefitMall is an example of a payroll provider that also offers cost-effective 401(k) and workers’ compensation programs for clients. Their innovative products make certain kinds of benefits more affordable to companies that would otherwise not be able to afford them.
How much do we really want to be involved?
Lastly is the question of how much your company wants to remain involved with payroll processing. Your typical payroll provider offers a range of solutions to meet a variety of needs. For example, you might be interested only in signing up for a basic program that gives you access to cloud-based software and electronic time and attendance tracking. You are happy to have your payroll department still do most of the work.
On the other hand, you may be looking to turn over your payroll entirely so that you can reallocate your staff to other things. What we are saying here is that you have to know what you want before you start looking.
There are lots of payroll providers offering lots of different solutions. If you are looking for one, step back and ask yourself the questions explained in this article. How you answer them will help you in your search.