How to choose the best payroll provider for your company

Michael Cheravitch, Director of Business Banking, FirstMerit Bank

Business owners have many choices when it comes to how to pay their employees.

Some handle the payroll process internally, and spend a great deal of time managing all the paperwork of federal and state taxes, Social Security, Medicare, union dues, 401(k) contributions and more. Some use payroll software, which allows accurate record keeping but often has a long learning curve. Some hire a local accountant or a professional tax lawyer/CPA.

Others outsource these tasks to companies that provide automated payroll services.

Smart Business spoke with Michael Cheravitch, director of Business Banking at FirstMerit Bank, about what services to expect from payroll providers and how to ensure you choose the right one for your company.

Why is it important for a business to choose the right payroll provider?

Payroll appears to be pretty simple on the surface. Employers calculate employees’ gross earnings. They deduct the respective payroll taxes and other ancillary deductions such as insurance or 401(k). Then, they send the government its share and produce a payment for the net amount to the employee.

However, payroll is actually more complex than this. There are bonuses, sick time, overtime and other factors that can change from pay period to pay period, affecting compensation. In addition, federal, state and local taxes are always changing and, depending on the complexity of a payroll, the time it takes to keep track of all of these changes can turn it into a daunting task.

If employers aren’t up to date on payroll tax requirements, such as rates or frequency of payments and filings, and they miss a deadline or pay an incorrect amount, they can be fined. Additionally, these errors can lead to an inaccurate payroll and, ultimately, unhappy employees. That’s why it is so important to do it correctly.

How can an outsourced payroll provider benefit a business?

With payroll being a much more complicated task than it appears, businesses need someone they can count on for more than just paycheck calculations. Entering all the data and pushing out a check is the easy part. It is everything else after the fact that becomes difficult.

A bank’s business online payroll, for example, could provide payroll tax payments and filings as well as 100 percent guarantee that payroll taxes will be paid and filed accurately and on time. With online payroll, you can offer direct deposit, which saves time and money for the employer and employee. There are no checks or check stubs to print, and the employees don’t have to make an extra trip to the bank on payday, so their time is spent focusing on business productivity.

How does this compare with attempting to do this work in house?

With most in-house accounting products there are additional costs for keeping the technology up to date and tax tables current. With an outsourced payroll provider, there is no software to purchase, no need to have personnel maintain it and no ongoing fees to keep it current.

Having an employee do in-house payroll presents a risk of knowledge walking out the door if that employee leaves the company. There is no need to have an ‘expert’ in-house with an automated payroll service.

How can business owners determine which payroll provider would be the right fit for their company?

There are many factors that go into determining the best solution when it comes to payroll. The five most important factors are reputation, customer service, ease of use, ability to grow with the company and, of course, cost.

Businesses need to look at the complete picture when deciding on a payroll provider. Working with a small, local payroll provider can present issues with out-of-state calculations and few, if any, offer any liability or guarantee with their service. However, working with a payroll provider that has a proven track record of success and growth offers peace of mind to the business owner.

Businesses should look for a payroll provider that has been recognized and awarded for the customer care it provides and can answer questions and provide solutions to problems. Also, look for a payroll service that provides live support available at one number, eliminating all the shuffling around and waiting for a call back.

With the many options available for payroll services, ease of use is one of the most important factors for business owners. For example, employers can look for an award-winning online product that allows business owners to run their payroll from any Internet-capable device. Employers simply log in to their online account, enter hours and other specific payroll information, preview the payroll to ensure data is correct and press ‘approve’ — everything else is taken care of. Processing payroll this way takes about five minutes.

Another important factor to look at is whether the provider can grow with the business’s future needs.

Finally, businesses should consider the cost of working with a payroll provider. One of the major advantages of working with an all-inclusive provider is that there are no hidden costs for direct deposit, reports, and payroll tax payments and filings. Online technology significantly cuts operational costs, and those savings are passed on to customers. For example, some customers could pay half the cost charged by larger companies, accountants and CPAs, and most local providers.

Michael Cheravitch is director of Business Banking at FirstMerit Bank. Reach him at (330) 849-8699 or [email protected]

Insights Banking & Finance is brought to you by FirstMerit Bank