Outsourcing particular business tasks can enable you to free up resources and energy to focus on your core competencies. Payroll is an important function and in all likelihood it makes sense to outsource payroll administration rather than hire resources in-house and dedicate them solely to the function. Payroll companies help you organize your payroll, adhere to policies and procedures, and get employees paid on time.



To stay on top of your tax obligations is reason enough for your company to consider using a payroll provider. Payroll administration warrants attention to detail and even the smallest indiscretion can attract heavy penalties from the tax authority of your country. In the US, the IRS has a history of levying heavy fines on small businesses for even the smallest transgression. Recently released statistics show that one out of every three small businesses is penalized in some way for not complying with tax laws.

Why should you outsource payroll processing?

If you company is large enough, you may choose to conduct payroll functions in-house but be prepared to hire at least a couple of employees dedicated to this function. You will also have to allocate resources to continuously train your payroll staff in use of accounting software and to keep up with the frequently shifting state and federal tax laws. Also if you are a growing company that is continuously adding new employees, teams and locations, managing payroll is going to be quite a challenge. Do you really want to get distracted from the core-functions of your business by administering payroll yourself?

Payroll service providers are experts in what they do and have economies of scale since they administer payroll for many other companies. More than likely, they will deliver payroll services to your company cheaper and more efficiently that what you can do yourself.

What Services Do Payroll Companies Provide?

Payroll companies provide various services. The following are the most common:

* Calculating pay checks for each employee

* Addressing tax obligations on a local, state, and federal level

* Printing and delivering checks

* Providing management reports

* Tracking employee benefits information

* Automatic check signatures

* Providing direct deposit

* Processing W-2 forms

* Processing 401k and mutual fund plans

* Addressing tax needs for your company and providing tax preparation

How to choose a Payroll Service?

Ask for quotes from several companies before making a final decision. An easy way to request quotes from multiple providers is to go to a B2B marketplace. Keep the following in mind as you decide on the provider.

* Can they provide accurate payroll service without any mistakes in employee's pay or providing tax information to the government? Ask for history of efficiency.

* An occasional mistake is acceptable but how quickly can they correct it. If the payroll service provider is overstretched, they may not have the resources to quickly provide the remedy.

* Is the payroll providers system and software compatible with your own operating systems? Would it be possible to transfer data to and from your business easily?

* Are the references flawless? Excellent customer service to business owners and its employees is important.

* How many clients is the payroll provider serving? Large number of clients may indicate a successful service but attrition in the past few months may indicate deteriorating quality. Does the provider have adequate resources to serve your business?

* Is the pricing competitive? Some companies may bait you with low basic fees and charge heavily for extras. Ask for an all inclusive package to compare prices.

Once you decide on a payroll provider, scrutinize the contract very carefully for any hidden fees or charges that may kick in after a few months of service.

Check the first few pay checks very carefully for any mistakes. It is better to uncover the issues early enough before they get compounded and more difficult to fix.

Hiring a payroll provider is an important decision for your business. It is tough to easily switch a payroll provider if you make the wrong decision. Make sure you adequately research all possibilities before making a final decision.