One of the first things you’ll need to do when opening a business is set up a payroll system.
Your payroll provider will handle everything from paying employees to collecting taxes and depositing your money into your bank account. You don’t have to worry about any of that — you just need to know how much money the company is taking out of your bank account, when it’s deposited into your bank account, and what taxes you’ll be responsible for.
Choosing a reliable payroll services provider is important for several reasons. The first is convenience; many payroll providers offer online tools that allow you to view all your financial data. You can see exactly how much money was deposited in your bank account last month, how much money was withheld from each employee’s check, and which tax forms were filed with the IRS.
A second reason to choose a reliable service provider is security; if an employee makes a mistake submitting his or her tax Form W-4 (the form that tells his or her employer how much they should be paid), it could cost you thousands of dollars in penalties and fines. With a payroll service provider, you have full control over who gets paid and exactly how much each person gets paid. Your employee’s salary information would never even get out of your hands.
Table of Contents
So what factors should you consider when picking a payroll services provider? Here are some tips:
- Be realistic about your needs: Payroll is a complex process, so don’t expect one company to be able to handle everything for you. Look at the offerings of several companies and pick the one that best suits your needs.
- Do your research: Find out exactly how many people work for your company, how much you pay them and how much it costs you in payroll taxes and fees (such as Social Security or Medicare). Then compare this information with the costs of each payroll service provider so you can make a decision based on what’s best for your business.
- Take advantage of free-trial periods offered by many payroll providers to see if they’re right for you in the long run and what their service level is like before committing to a long-term contract.
Here are the most important considerations:
Payment terms: Most payroll vendors offer a month-to-month model, in which fees and charges are billed monthly (typically on a monthly basis). If you’re troubled by late payments, this may be the way to go, because there’s no long-term contract. However, if you want flexibility and more control over your finances, you might consider signing up for a three-, six- or 12-month plan so you can cancel at any time.
Fees and charges: How much will it cost you? Multiplied by how many people you employ, that’s how much money you’ll spend on payroll services each year. Make sure you understand exactly what the costs are before signing up — listed costs might include taxes, state unemployment tax, worker’s comp premiums and administrative fees.