Monday, September 27 , 2021

Tips for Hiring the Right Payroll Outsourcing Provider for Your Business

Selecting the right payroll outsourcing provider has a massive impact on your company. When you tap on a professional payroll provider, you get the weight off your HR team’s shoulders as the external partner handles your company’s payroll-related functions.

Not only does outsourcing payroll reduce the administrative burden, but it also decreases the cost overhead, saves management time, eliminates security risks, and most importantly—guarantees compliance with statutory regulations.

More About Payroll Outsourcing

As the name suggests, payroll outsourcing is the process where an organisation contracts a third-party agency to take care of its payroll management needs. 

Many businesses acquire payroll outsourcing services to focus on their core product or service offerings, and remain competitive in the market. The external payroll service provider navigates through the complex payroll process whilst ensuring payroll accuracy and efficiency. 

The best thing about outsourcing payroll is that companies gain access to experts. Payroll outsourcing providers are obligated to keep up-to-date with the rules, regulations, and changes in tax rates for all geographic locations. This means business owners don’t have to worry about staying on top of the laws and latest tax requirements.

Services to Look for in a Payroll Outsourcing Provider

While it’s necessary to look at the experience and qualifications of a payroll outsourcing company, the selection goes beyond those two aspects. You must also look at the provider’s specialisation and check the services it offers.

Here are a few of the services that you must consider when selecting a payroll provider:

  1. Automated Tax Table Updates

In the world of payroll, staying current with constantly changing labour laws and tax rates can sometimes be daunting and time-consuming.

Small businesses with understaffed HR teams are particularly affected by this as they need to juggle multiple human resources duties all at once. Thankfully, HR and payroll service providers can ease their burden and focus on other value-adding tasks.

To ensure you leave your business’ payroll in good hands, check whether the company’s tax tables are automatically updated. The automated tax table takes the guesswork out of federal, state and local taxes, enabling accurate withholding of employee taxes.

  2. Real-time Calculations

When hiring a payroll outsourcing provider, be sure to ask about their time to run and process payroll. Do they have quick access to real-time payroll data? Or do they automatically run payroll and calculate how much each employee earned for the pay period?

Questions like these will help you determine the third-party agency’s ability to process payroll and issue paychecks on time and allow you to monitor what your employees are doing and how much they’re getting paid.

  3. Data Integration 

If your business has existing systems for managing financial transactions (i.e., general ledger software and point-of-sale (POS) systems, etc.), opt for a payroll outsourcing company with data integration capabilities.

Integrating such systems with an online payroll system offers you two primary benefits: secure transactions and up-to-date data. Data integration also plays a crucial role in eliminating duplicate data entry, reducing paperwork, and point-in-time reporting, to name a few.

  4. Tax Filing Services

Payroll processing involves one critical function—tax filing. The bitter truth is that penalties for errors, omissions or late payroll tax filings can break your pocket. Payroll mistakes may cost you a hefty amount of money, not to mention cause valued employees to quit. 

To make sure you don’t fall trap into unwanted, costly events, ask your prospective external payroll service provider about their tax filing services. It also helps to know if they assist with withholding employee taxes, issuing W-2 and 1099 forms to employees, filing quarterly payroll tax reports, and paying state and federal taxes.

  5. New Hire Reporting

Whether you have no current plans to hire new employees, it still makes sense to consider a payroll outsourcing provider’s ability to create and generate new hire reports. Compensating newly hired employees isn’t as easy as you think because it involves pre-, actual, and post-payroll processing activities.

Such services let you determine the new hire’s pay frequency, verify all the information needed to process the employee’s first paycheck, ensure accurate compensation, and submit the new hire’s withheld payroll taxes, among many other things.

  6. Payroll Analysis Reports

Since your company’s payroll is managed externally, your payroll partner must give you a bird’s-eye view of all your payroll expenses—from compensation to salary deductions, other benefits, and taxes.

It should provide you with essential payroll reports, including employee time reports, cash requirements reports, payroll tax reports, and more. The reports should also highlight comparative data, year-to-date data, and pay periods covered.

   7. Direct Deposit

Most payroll outsourcing companies send out paychecks through direct deposit. While this one is a common service, it never hurts to verify and check whether your potential payroll provider offers the same thing.

What’s good about the direct deposit is that paychecks get directly into your employees’ bank accounts, which means your employees receive salary checks timely. It also reduces the risk of check fraud and lost or stolen checks, and minimises paper costs, among other benefits.

Final Thoughts

Outsourcing payroll is the best decision to do especially if your company has a small human resources team. Payroll processing may only put weight on their shoulders, or worse, compromise their productivity and efficiency.

Before you contract the services of a payroll outsourcing provider, assess first your needs and check whether the third-party company can help you meet them.  

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