While payroll services all operate differently, most companies have things in common. Payroll outsourcing works by giving all the functions of payroll processing, such as collecting information about hours, calculating employee tax information, and shifting funds to various accounts, to a third party. A payroll processing company has the ability to write checks, deposit funds to accounts of employees, and distribute W-2 forms at the end of the year.

The payroll processing service that you choose is not a small decision. This vendor will have access to your private assets and information. It’s imperative that you choose a payroll outsourcing company that you can trust! Here’s what to look for when searching for payroll outsourcing:

Reputation: Check reviews, BBB ratings, and company guarantees before signing on. Inquire as to how often they’ve had to pay fines in the past, and make sure you read through any contract thoroughly. Make note of what recourse you have if a mistake was to be made, since you are often liable for their actions.

Services: See what range of services the payroll processing service offers and make sure you can get all the services you need in the price range you want. These might include standards for your industry that wouldn’t apply to any client (high insurance for movie stunt work, for example), so make sure you have access to whatever you might need.

Operating Procedures: If you’ve already decided that payroll outsourcing is for you, it’s probably because you want to save time and money by having a streamlined process. Investigate exactly how a setup with each payroll outsourcing company would work including your role and responsibilities, the timeline for their work, and what-if situations that can sometimes arise. Find out how long procedures take, how much access you will have to your account, and what happens if something doesn’t get done on time.

As for a plan of action, you may want to first assess the current condition of the payroll system, so you are familiar with it and able to speak about it comfortably. It can often help business owners or managers to take a good look at their current system to fully feel comfortable choosing a provider that can take care of all aspects.

Then, assess the cost of your current situation and a price range for your search. You may also want to figure out which tasks you are good at and want to keep in-house, rather than outsource. Then start to shop around for different payroll processing services, asking the above questions and evaluating each company for price, services, reputation, and fit with your business. If you have further concerns, get references and client feedback. Payroll outsourcing can be a weight off your shoulders, as long as you find the right payroll processing service for your company.


Teresa Katubig is the author of this article on Payroll Outsourcing. Find more information, about Small Business Payroll Services here.