12 Questions to Ask when Outsourcing Payroll

questions to ask when outsourcing payroll

Finding the right payroll provider requires time, research, and all the right questions. Here are some questions to ask when outsourcing payroll.

As a small business, there are many questions to ask when outsourcing payroll processes. For most companies, outsourcing payroll represents freeing up valuable time for professionals to perform more impactful functions at the company. So it’s important to find a vendor that saves time, rather than wasting it. Finding the right payroll company begins with asking the right questions and demanding the right services.

To find the right vendor, you’ll need to clarify your needs and expectations. What you’re hoping to achieve when you outsource the function?  Are you looking to save your HR team’s time? Are assuring taxes are paid on time and in compliance a top priority? Are you hoping to outsource because your business doesn’t need a full-time payroll processor? Consider all the reasons you’re looking to outsource– then make sure the answers you get from vendors align with your needs.

Once you understand why you want to outsource, it’s time to consider what levels of service you want to compare vendors. Some are check processors: they receive your data and calculations and simply make payments to employees. Others calculate hours, taxes and deductions based on information you submit. Still others provide full service processing – receiving hours and deducting taxes and other contributions (benefits payments, 401(k) contributions, FSAs, wage garnishments, etc.). Will you need a vendor that can manage PTO tracking and allocation? Decide what level of service you need and keep those “must haves” with you as you shop for the right vendor for your business.

Outsourcing checklist

Look for a company that understands the ins and outs of compliance (even at the state and local level) and is fluent in managing tax and FICA contributions to make your job easier. Below are some questions to ask when outsourcing payroll; remember when asking these questions to keep your needs top of mind to make sure their answers align with your priorities.  

Questions for payroll processors

  1. What services do you provide?This should be your first basic question. Using the list of services you want, do they check all the boxes? Are they able to provide everything you’re looking for? If some services aren’t available through a vendor, you’ll need to weigh the importance of that service against other benefits they provide.
  2. Do they manage compliance and tax payments?  One of the most common reasons to outsource payroll (after saving time and resources) is to assure taxes are submitted in compliance with the law. An outsourced payroll processing company should handle all state and federal tax contributions compliantly, accurately and on time. Additionally they should manage end of the year W2 and 1099 form distribution to employees.
  3. Can they track employee time? If you don’t have a system in place or are tracking hours manually, online time sheets can track employee hours for you. Outsourcing with a vendor that allows staff members to record their hours worked is yet another time saver for HR. Your admin will need to approve the hours, but the majority of the work will be done for you. Some vendors can also process payments for contractors: if you use any remote or 1099 workers and  want to pay them from a single source, make sure your vendor has that option.
  4. Can they scale as your business and needs grow? You’ll want to look for a vendor that can grow as you do. Look for a company that can manage payroll for 2 employees to 20,000. You don’t want to be shopping for another vendor if your team outgrows their system.  
  5. How user-friendly is the platform? Ask for a walk-through of the service if possible. Is it intuitive? If the service is too technical you may spend more time working with it than if you processed payroll manually. Will employees be able to manage their own data without extensive training? A user-friendly platform that’s easy to navigate is the time saver you’re looking for.  
  6. What is the pricing structure? Look for a vendor that provides a transparent, clear pricing structure up front based on the services you require. Flat rate pricing is the most economical way to outsource, but some vendors use a sliding scale to manage payroll. Look for a company that provides the most service for your spend without any hidden costs or up-charges down the road.
  7. How complicated is implementation? Merging into a new payroll system should be easy and seamless. Whether you’re integrating your own platform or starting from scratch, the process shouldn’t require a degree in IT. You’ll want to enter employees into the system (or integrate them) in a few simple steps, providing all the information needed for the platform to take over. Look for a vendor that can provide a checklist of what you’ll need to have on hand to get started.
  8. How accessible is help? Customer care is job one for any payroll provider. You’ll want to know how easy it is to access assistance 24 hours per day 7 days a week. Are there representatives available? Does the platform have an FAQ page? Are there links to tutorials and answers? Are chat representatives available to help? Strong, accessible customer care should rank high on your list of “must haves” when shopping for a vendor.
  9. How secure are they? You’ll want to know how secure your data is, where it’s stored and if they’ve experienced any breaches. The information you provide is highly sensitive: make sure your vendor understands the ramifications of any data incursion and guards vigilantly against them.
  10. How current is their system? Are they digital dinosaurs or working with the most cutting-edge tech available? Is the platform mobile-optimized for employees and HR to access whenever/wherever? Make sure to ask how current their system is and how frequently they update to use the best tech available.
  11. What unique features do they offer? How does one vendor stand apart from the crowd? Are there particular services or options they can offer that no other platform can? Any extras or perks you can get from the vendor, whether they save time for HR, make life easier for employees or a combination of both can be huge plusses when it’s time to outsource your payroll processing.
  12. Are they integrated with other HR services? As you reap the time savings that outsourcing payroll can provide, you’ll want to know what else the vendor can offer. Can they help with onboarding new hires? Are there people and performance management tools available that can help HR and managers work smarter? Can they help with scheduling, time off tracking, including vacations, ADA and FMLA leave? Is ACA compliance assistance available? When it comes time to grow, will you be working with a one-stop shop, or will you have to reinvent the wheel?  Look for a vendor that can provide as many of these services that you can use today or plan for in the future.

Outsourcing your company’s payroll is an excellent way to save time and make sure this important function is managed correctly and in compliance. Choosing the right vendor, who can provide the services you need today, as well as those you might need tomorrow, lets your company focus on business, not paperwork.

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