5 Things to Look For in a Payroll Vendor

The right payroll vendor can help you cut down on time, effort, and errors each pay period.

Don’t overlook these crucial characteristics when searching for a payroll vendor

Small businesses that outsource payroll do so to save time and money, as administering payroll in-house takes significant effort. Those that handle payroll in-house are well-advised to utilize technology that accelerates the process, simplifies administration, and cuts down on errors. Regardless of which option you choose, it’s important to select the right payroll vendor.

Next are 5 factors to consider during your quest for a payroll vendor.

1. The pay experience

Employees will become disgruntled if:

  • Their paychecks are late
  • Their take-home pay is less than it should be
  • They have to wait a long time to be paid
  • Their employer fails to appropriately communicate issues impacting their pay
  • Their employer fails to offer different methods of pay, such as direct deposit, checks, and pay cards

These scenarios cause negative pay experiences for employees and can ultimately hurt retention.

A positive pay experience means:

  • Timely paychecks
  • Accurate pay
  • Reasonable pay frequencies
  • Clear and responsive communication about pay
  • Flexible payment methods

Additions such as employee self-service, mobile accessibility, and on-demand pay are also likely to resonate with employees in a favorable way.

Make sure your payroll vendor is committed to improving your employees’ pay experience, on a consistent basis.

Make sure your payroll vendor is committed to improving your employees’ pay experience, on a consistent basis.

2. Payroll tax administration

To properly administer payroll taxes, small employers must:

  • Interpret federal and applicable state and local payroll tax laws
  • Withhold payroll taxes from employees’ pay
  • Determine their own payroll tax liabilities
  • Remit employees’ tax withholdings, along with their own share of payroll taxes
  • Conduct payroll tax reporting
  • Stay on top of payroll tax laws
  • Implement payroll tax changes

With so many payroll tax responsibilities, it’s not surprising that many small businesses end up outsourcing payroll tax administration, if nothing else.

Each pay period, business owners spend 4 hours and 52 minutes calculating, filing, and paying payroll taxes. That’s 21 days a year.”

A survey by Quickbooks found that Each pay period, business owners spend 4 hours and 52 minutes calculating, filing, and paying payroll taxes. That’s 21 days a year.” Most of these businesses did not realize that they would have to spend so much time on payroll taxes and “wish they could outsource payroll completely.”

For small businesses that administer payroll taxes in-house, it’s generally best to utilize automated technology that:

  • Calculates employee and employer taxes
  • Creates, formats, and files Form W-2s and 1099s
  • Enables online payroll-tax reporting and deposits
  • Allows you to generate customized payroll tax reports
  • Accommodates federal, state, and local payroll tax administration

3. Integration capabilities

The days of managing payroll via siloed systems are swiftly fading. Siloed systems are expensive to maintain and can be labor-intensive — since information must be entered into each system separately. They increase the risk of data entry mistakes, limit payroll reporting capabilities, and make it difficult to retrieve cross-functional data.

In today’s rapidly evolving business climate, employers need integrated technology that streamlines their essential business processes with payroll.

For example, Zenefits platform integrates payroll with::

  • New hire onboarding
  • Employee time tracking
  • Scheduling
  • Employee leave tracking
  • Employee benefits deductions

Zenefits also facilitates third-party integrations, including with:

  • Applicant tracking systems, such as Breezy HR and JazzHR
  • Time tracking apps, such as T-Sheets and Deputy
  • 401(k) providers, such as Guideline and Human Interest
  • Accounting software, such as Xero and Quickbooks
  • Apps for productivity, work and income verification, financial services, employee travel, performance management, and employee engagement

4. More than just payroll

While payroll is a separate business function, it is also closely linked to human resources, employee benefits, and finance. As a result, these functions have overlapping qualities. And the more your business grows, the more complex the overlap gets.

While payroll is a separate business function, it is also closely linked to human resources, employee benefits, and finance.

So, be sure to choose a vendor who understands that payroll isn’t just about payroll — even if you’re hiring them to do only payroll processing. This is important because if the vendor doesn’t consider or address possible overlaps, serious consequences can occur that affect not just payroll but also human resources, employee benefits, and finance.

Small employers that do payroll in-house are often better off with technology that’s equipped to handle payroll and related functions. For example, Zenefits human capital management technology combines payroll, human resources, and employee benefits into one application plus integrates with accounting software. From one centralized database, you can manage and pay your workforce plus meet your regulatory and financial obligations.

5. Customer support

Great payroll vendors know that offering great customer support sets them apart from their competitors. You can distinguish them by their ability to:

  • Deliver personalized support
  • Make customer service part of their company culture
  • Supply tools for getting payroll done quickly, accurately, and on time
  • Respond promptly to customer inquiries and concerns
  • Keep customers informed via comprehensive resources

Other considerations when seeking a payroll vendor

  • Do they cater to your industry? Some industries — such as healthcare, retail, and construction — have unique payroll requirements.
  • Are they financially stable?
  • Will they accept responsibility for any errors they make?
  • What are the details of their payroll continuity plan, such as when disasters or emergencies happen?
  • What security measures do they take to protect their customers’ data?
  • What’s involved in the implementation process for new clients? How smooth is it, and how long does it take?
  • What quality control standards do they have in place?

Make sure they’re upfront about pricing and are scalable enough to meet your growing business needs.

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