Payroll is one of those business functions where there is little upside if you get it right and major downside if you get it wrong. Your employees (and tax agencies) expect to be paid correctly and on time, and there are consequences when they aren’t.
According to a recent article from BusinessWeek, the IRS issued $4.5 billion in penalties related to employment taxes last fiscal year. With so many changing regulations to keep up with, it can be difficult for small and mid-sized businesses to avoid these fines. In addition, payroll errors have a negative impact on employee engagement. Each payroll issue is another blow to their trust in you as an employer.
So what is a small or mid-sized business leader to do? Many organizations choose to outsource payroll processing and tax filing to a payroll services provider, which costs them 18% less on average than businesses who keep these functions in-house, according to a study by PricewaterhouseCoopers.
When looking to outsource payroll processing to a third party provider, here are three key areas you’ll need to consider:
Payroll software functionality
When you are investigating payroll software providers, one of the most important questions to ask is, “What can the system do?” You’ll want to make sure the payroll software you choose offers all of the following:
* Unlimited earning and deduction codes with the ability to add more
and to make changes
* Automated data transfer from timekeeping system into payroll to avoid manual entry
* Multiple file import options, whether from a timekeeping system or an Excel spreadsheet
* Ability to easily make changes to employee information through payroll entry
* Ability to create and report on custom fields to track certifications, emergency contacts, parking passes or any other relevant employee information
* Automatic real-time transfer of new hire data into time and attendance system
* New-hire reporting with EVS (Social Security number verification) in each state
* I-9 tracking and verification fields with expiration date tracking
* Ability to track and maintain all 401(k) YTD data including employer match calculations, employee contributions, loans and eligible wages
* Automated paid time off tracking, so there is no need to key in new balances each year
* Handling of all garnishments (child support and others) electronically or via check
* Instant gross-to-net capability, without having to transmit payroll data first
* Payroll preview documents available instantly, prior to submitting payroll
Getting employees paid
Beyond providing your payroll or HR administrators with the functionality they need to process payroll quickly and correctly, you’ll want to consider the experience for your employees as well. Make sure your payroll services company provides:
* Multiple payment options, such as direct deposit, paycards and live
* Unlimited amount of direct deposit transactions with the option to have multiple direct deposits per employee
* Automatic check signing and stuffing
* Overnight delivery of live checks and non-negotiable checks
* Third party checks, such as FSA and HSA
* Employee online and mobile access to check stubs and W-2s
Access, support and scalability
In addition to product features and payment options, you will want to think about some additional factors related to how the software will be accessed, adopted by users, supported by the provider and scaled as your business grows. Consider the following:
* The software should be secure and cloud-based, meaning you can safely
access payroll anytime, anywhere.
* The software should also be easy to learn and use, increasing adoption and efficiency.
* The provider should offer live, in-person or web-based training in addition to recorded training sessions, documents and other resources available online.
* You should receive ongoing training and support from a dedicated team.
* Support should be available via phone, email and online resources.
* The provider should offer more than just payroll, so they can grow with your business.
This is not an exhaustive list, and your requirements may vary with the needs of your organization. Learn more about how to purchase payroll and HR solutions in this software buyer’s guide, or download the HR and Payroll Partner Requirements Checklist for more details.
To consult with product experts, connect with a Paycor representative to perform a more detailed analysis of your organization’s needs.
Sources: BusinessWeek, PricewaterhouseCoopers
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