Retail POS terminal with payroll software in retail shop - Which type of payroll provider is right for you?

Which type of payroll provider is right for you?

Thursday, December 04, 2014

Determining and establishing the best payroll service for your small business

Running payroll is one of the most important responsibilities of any business owner, but it doesn’t have to be the most stressful. When you work with a payroll service provider, you as a small business leader get the peace of mind of knowing you have the resources to help you pay your employees and taxes accurately and on-time. And just as promising is that you get to focus on more important things, such as growing your business.

So, in this article, we’re going to discuss what a business payroll system is and how it works, why payroll systems are important for your business, the main components to look for in a payroll service provider, and how to choose the right payroll provider and payroll system for your business.

Let’s start with what a business payroll system is and how it works.

What is a business payroll system and how does it work?

Running payroll and ensuring efficient payroll processing is a critical aspect of effective business operations. Luckily, businesses have a variety of options when it comes to selecting a payroll solution that can perform important and necessary tasks such as processing payroll, managing employee benefits, calculating, withholding and paying taxes, ensuring compliance with local, state and federal regulations, new hire reporting and onboarding, and tracking of paid time off (PTO) and sick time. Furthermore, employees also have access to their information through self-service portals, and can even view and update their data through mobile options such as an iPhone or Android.

Payroll providers come in all shapes and sizes. The main types of payroll providers are payroll software providers, full-service payroll providers, accountants, and professional employer organizations (PEO).

Let’s look at each type of payroll provider in more detail, starting with payroll software providers.

Payroll software providers offer online payroll services to support complex calculations and automate the processing aspect of payroll. Software packages often include different levels that may or may not include outsourcing of the payroll responsibility. Moreover, software programs often include integrations so that human resources (HR) information can be tracked along with the payroll data.

A full-service payroll provider is a payroll company that handles all aspects of payroll for the business. This payroll option supports businesses to file payroll forms correctly and ensure accurate calculations for pay stubs and tax calculations. A full-service payroll provider goes way beyond the basics of payroll calculations. They’ll handle deposits and withdrawals, withholding and paying garnishments, and filing federal, state, and local taxes. Most full-service payroll providers also integrate time and attendance and benefits administration.

Accountants consult businesses on specific tax regulations in conjunction with payroll completion. For businesses that have more complex filings or needs, having the individual consultation option may be beneficial.

Lastly, a PEO offers to companies employees who are payroll specialists or who specialize in full-service payroll tasks as well as HR solutions, time and attendance, Social Security, and benefits administration, in order to meet compliance standards and regulations.

With an array of options for payroll providers, the task of choosing the right fit includes determining the needs of your business, the offerings of a payroll system, and what services are available within the larger budget and resource capabilities.

The use of a business payroll system begins during the onboarding process of an employee. Personal information and tax documentation is collected and stored so that the employee's wages and taxes can be calculated accurately. Wages are tracked within the payroll system so that the employee is issued correct paystubs. Payroll systems ensure that tax filings are complete and that the amount of time the employee worked during each pay period matches the amount of money the employee is paid. In addition to compensation, this can include bonuses and commissions.

A business payroll system oversees this process for all employees at a given company and maintains detailed and secure records to track all financial information. Accurate and detailed records are especially critical to maintain in case the IRS requires an audit or review of payroll information. Some payroll systems allow for employee self-service by which employees can update their withholdings and the ability to see their wage calculations and garnishment information through a mobile app. Payroll systems also track paid time off (PTO) and retirement plans, among others.

Why are payroll services important?

Payroll services enable business owners, especially small business owners, to focus on other important tasks in their business operations. As discussed, a system that processes payroll has to consider a variety of regulations, laws, and standards so that businesses don't encounter fines from the IRS and other regulatory agencies. A payroll service eases the responsibility for small business owners so that they can trust they have all of the necessary parts of the system in place. Payroll services will automatically include necessary tax forms for federal, state, and local taxes, manage payroll documentation, and can support new hire reporting. On the other hand, oftentimes when small business owners try to take on a payroll system by themselves, human errors are more likely to occur which can result in a disruption of business and financial consequences for the business.

What are the main components to look for in a payroll service provider?

  • Security. Arguably the most important element to look for in a payroll service provider is a service that prioritizes protection of sensitive information. Payroll data should be stored on a secure server with encryption options. It is important that any payroll service provider that you consider guarantees the security of their platform through strong network protection, firewalls, and limited accessibility to data. A strong indicator of security with payroll service providers is if they have Service Organization Control (SOC) compliance. SOC 1 (or higher levels like SOC 2 or SOC 3) is a professional standard that demonstrates that the provider has strong payroll data protections and prioritizes security improvements on a regular basis.
  • Pricing. As mentioned, it is important that your business find a payroll service provider that aligns with the budgetary requirements of your company. It is important to ask about pricing, especially to understand the structure of fees. Some providers will have a base price and then add additional charges based on the size of your business or additional features you may want to include in your package.
  • Tax information. When considering a service, it is critical to confirm that the provider will shoulder the responsibility for the completion of tax filings and tax-related reports. Support with taxes is one of the major draws of hiring a service for support, and so gaining an understanding of how the provider will perform this is essential.
  • Human Resources. In addition to small business payroll, help with HR services is another benefit of using a payroll service provider. Looking for a payroll service that brings expertise related to benefits administration and HR will strengthen your company's ability to offer the best service to your employees, including add-on features like timekeeping, so that all employee data can be automated, accurate, and support overall employee management.

How to choose the right payroll provider and payroll system for your business

Deciding on the right payroll service for your company should be a thoughtful process with a decision that ultimately benefits your small business as best as possible.

As you consider the various payroll service provider options, it is important to consider the following steps:

  1. Identify gaps and current challenges with your payroll system. List out what is and what isn’t working with your current payroll system so you can gain insight into what you need help with from a payroll provider. This will help you seek out a provider that can directly align with supporting gaps at your place of business.
  2. Consider levels of support needed from experts. Whether you want high level consultation (perhaps working with an accountant) or ongoing customer support from a provider, consider what level is best suited for your own skill set and knowledge base.
  3. Determine your ideal date for start of service. Knowing when you would like to implement payroll services will help you communicate and follow through on a plan with the identified provider. This will also help you plan out other possible integrations or software you may want to add on.
  4. Research your options. Seek out ideas, recommendations, or experiences from other small businesses, particularly with vendors who have served their needs well. You may also want to include cost estimates as part of the research process so that you are clear about the financial investment for a payroll service provider that aligns with your needs.

Are you ready to seek out the best payroll service provider for your company?

Heartland is ready to help.
Heartland helps nearly 1,000,000 entrepreneurs make and move money, manage employees and engage customers with human-centered technology solutions that allow them to rise above the daily grind and lead their businesses into a brighter future. Learn more at