With payroll, timing is everything. You have to pay your employees on time, pay the IRS on time, and file all the right payroll tax forms with government agencies on time to stay compliant. This adds up to a lot of your time spent crunching numbers and stressing over deadlines, which is why many small business owners turn the job over to an online payroll service.
Another good reason to go with an online provider: It’s easy to make mistakes. Failing to calculate net hourly salary (which may include overtime), withholding taxes, state and city income taxes (if any) accurately, or missing a tax filing due date may result in a penalty.
What Are the Benefits of Outsourcing Payroll?
Even if you have just one employee, it still makes sense to streamline the manual payroll process. Not only is it more efficient it’s consistently more accurate. Once you’re set up, the math is done for you.
Payroll services stay on top of tax rate changes, make sure that you never miss a filing deadline, and some of them offer an “accuracy” or “payroll tax guarantee,” so that if the basic information you provide is correct and timely and you have sufficient funds in your account, the provider will ensure that your payroll tax deposits and filings are on time and accurate. If not, the provider will pay any resulting payroll tax penalty.
What Features Does an Automated Payroll Vendor Provide?
Top payroll providers offer tiered services so you can choose the features you really need. You can always upgrade as you grow. Basic services generally include automatically paying employees by check or direct deposit (a popular benefit for your workers), calculating all appropriate withholding, and paying correct payroll taxes to government agencies. Access to payroll-processing experts is usually included, too.
What Services are Available Beyond the Basics?
Depending on the provider, additional features can include:
- Paying non-salaried (hourly) workers by direct deposit
- Tracking employee overtime, accrued vacation, and sick leave
- Onboarding and reporting new salaried employees as required
- Preparing and filing W-2 forms
- Managing employees’ health and pension plan contributions
- Making summary filings to state government agencies
- Providing payroll summary accounting reports
How Much Does an Automated Payroll Service Cost?
Prices for basic services start at as little as $12 to $20 a month and can increase to anywhere from $80 to $200 depending on how many employees you have and the additional services you need. Providers usually charge an extra fee ranging from $1.50 to $5 per employee over the number covered in your tiered price range. Ask about annual versus monthly billing plans to help save on the cost, and try a service before you decide. Leading providers offer a trial period.
Do Online Payroll Services Integrate with Accounting Systems?
Yes. Sophisticated, full-service payroll providers are able to automatically integrate payroll data with many small business automated accounting systems. This happens either by automatically exporting payroll-related data to your accounting system or preparing the information in a format that makes it easy to import into your accounting system.
Is it Possible to Run Payroll from Mobile Devices?
Yes. Most established online payroll providers enable you to access and manage your payroll activities via iPad, iPhone, and Android devices. In addition, the service should make it seamless for employees to view their paycheck information through a secure portal.
How Secure Are Online Payroll Services?
The increased threat of data breaches continues to push companies — leading online payroll providers — to invest in the most advanced security tools to store and protect client information. This includes:
- State-of-the art encryption systems (to save password-protected files in encrypted form)
- Redundant backup systems (duplicating key functions to increase reliability)
- Multiple server locations (storing the same information in more than one place as backup)
When Is the Best Time to Switch to a Payroll Service?
For simplicity and accuracy, it’s best to make the transition at the end of a quarter.