Choosing a Payroll Service: A Buying Guide for Businesses

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Learn about the costs and qualities you should consider when selecting a payroll provider for your business.

  • Payroll companies are able to help you process payroll, calculate, file and submit payroll taxes, as well as generate payroll tax statements.
  • Pricing for payroll services varies depending on what you select, but most charge a monthly or yearly base fee that can range from $20 to $100 and a per-employee fee that can be $1 to $15 each month.
  • Consider features, ease-of-use, reputation, integrations, and customer support when choosing a payroll provider.
  • This article is intended for HR managers and small business owners who are searching for payroll services.

Every company that employs staff has a payroll process in place to pay them. Many companies today prefer to use a payroll service rather than doing it themselves or outsource the work to a bookkeeper.

This guide will tell you everything you need to know to select one of these services. Are you sure what you are looking for? To see our top picks, visit this page.

What is a Payroll Services?

A payroll company is a service provider that automates payroll calculations, payroll tax statements and year-end taxes for your company. Full-service payroll providers can also handle deposits and withdrawals for employees, pay garnishments and withholding, as well as new-hire reporting. A payroll system allows you to pay all types of employees, including freelancers, part-time workers, and full-time employees. This allows you to focus on your business while payroll experts handle your payroll.

Other types of Payroll Options

  • In-house: For large companies with many employees, it’s a smart idea to hire an in-house accountant to manage your payroll. Your accounting team will be familiar with the culture and intricacies of your company so that they can adapt to your company’s needs. You can also reach them immediately in an emergency situation or for a last-minute modification.
  • Bookkeepers A bookkeeper prepares your account and keeps you informed about your finances. This is an option for small businesses with fewer employees. You can either be your bookkeeper or an employee in-house.
  • Online payroll: You can use many online services to manage your payroll. Although this option will take more time as you will be entering all the data and processing payroll, it can save you money.
  • Software: Payroll software is similar to an online payroll service. You will need to take the time to enter all data. The software offers automated options that can save you time and make it easier to process everything online. However, you must maintain the software and double-check the results to ensure no errors.

What are the Online Payroll Services?

Online payroll services work in the cloud. You don’t need to install or maintain software and can access your payroll from any location. This program can be used to pay both full-time and part time employees, as well as contractors and freelance workers.

Online payroll usually includes many services:

  • Payroll processing Online payroll services calculate the amount employees should receive for each pay period. These systems take into account wages, shift differentials and overtime pay. They also calculate taxes and social security and benefit deductions. The systems then send out payments by check, prepaid debit card or direct deposit to employees.
  • Payroll taxes and filing: These services are able to withhold taxes from employees, file quarterly payroll tax reports and pay tax withholdings to appropriate local, state, and federal agencies. They can also issue W-2 forms to employees and 1099 forms to them at the end. Certain services provide an error-free guarantee. If a mistake is made, these companies will correct it and pay any interest or fines.
  • Reporting on new hires: Many payroll companies report your new hires directly to the government.
  • Integrations – Online payroll services can be integrated with many payroll-related software programs that businesses already use such as accounting software and time and attendance systems and human resource software.
  • Manage PTO:Many services allow you to track how many sick and vacation hours your employees have used. Many payroll solutions allow you to request time off and approve your request.
  • Employee self service: Employees can typically access the online system for their pay stubs and PTO balances.
  • Mobile Access:Many platforms offer mobile apps and mobile-friendly websites that allow you to manage and run payroll using your smartphone or tablet.
  • Payroll Reports:Detailed wage- and labor reports can help you get a better understanding of how your business works.

Online payroll services have the greatest advantage: they do all the work for you, including payroll calculations, tax payments, year end tax forms, and payroll tax payments. These systems allow you to run your payroll in a matter of minutes.

The downside to using an online payroll provider is the fact that it can be more costly than manually handling payroll. Your payroll provider is responsible for ensuring that everything runs smoothly. You could face angry employees or a government fine if the provider makes a mistake. Some companies offer an error-free guarantee that will offset this.

What is the cost of online payroll?

Although the cost of payroll services can vary, most companies follow a common pricing structure. There is a flat fee per month or per period. Per-pay-period providers will charge for each payroll run, while monthly providers can provide unlimited payroll runs per month.

Many providers offer different pricing plans to suit different levels of service. A basic plan may only cover the administration of payroll. However, more expensive plans can pay for payroll taxes and generate W-2 forms for employees.

Based on the plan and provider, base fees can range from $20 to $100. Many services charge $1-$15 per month for every paid worker or contract worker.

There are some services that require additional costs for direct deposit. These include the year-end tax services, as well as the set-up of the system.