Six Ways to Evaluate Your Payroll Service Provider

George Whitehouse, CPA, is a founder and Senior Vice President of Sales and Marketing for Payroll Network, the largest independently-owned payroll management company that provides payroll processing and HR services to government contractors and other companies in the Washington, D.C. region.

About 10-20 percent of businesses switch payroll service providers each year, often to get better customer service. Ensuring payroll is delivered on time and accurately is imperative to the successful operation of every organization-large or small. You should consider the following six factors when evaluating a payroll provider.

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1. Industry Knowledge: You wouldn't allow an inexperienced lawyer to defend you, so why would you entrust your most important assets--your employees and your finances--to a company that doesn't understand your industry? During your search, ask potential service providers how many of their clients are in businesses similar to your own. But don't stop there. Ask for a list of references to contact for more information.
2. Reputation: You've heard it before and it's true. Your reputation really does precede you. It's no different in this business. Find out if a prospective payroll service provider belongs to any professional associations such as Independent Payroll Providers Association (IPPA) and American Payroll Association (APA). Additionally, talk to trusted advisors like your CPA, banker, third-party administrator, and benefits and investment providers. These professionals often work in tandem with payroll service providers, so they are an invaluable source of information. They have a solid understanding of what payroll providers should offer clients and which ones regularly provide exceptional customer service.
3. Flexibility: Look for a company willing to perform a face-to-face requirements analysis of your business. They will assess your needs and help you determine what components are necessary to your payroll system. Don't forget to confirm that the prospective provider can meet all of your criteria.
4. Size: Bigger isn't always better. Just because a payroll firm is large and nationally known doesn't make it the right one for you. Compare the flexibility and customer service components of each candidate to see if they can match your needs.
5. Service: Service or lack thereof is the number one reason businesses leave their current provider. Personal service is more than the provider addressing you by name. No matter how dazzling a provider's offerings, nothing can take the place of great customer service. Good customer service:
• Understands you...and your business
• Is 100% committed to your satisfaction
• Encourages you to call them should you have any concerns or additional needs
• Exhibits a depth of industry knowledge and is willing to pass it along
• Has the ability to take care of your needs quickly and efficiently
6. Tax Filing: Tax filing is the nemesis of many payroll departments. Improper or delayed filings can result in hefty penalties and liens. Small and medium size companies, in particular, grapple with this issue. A payroll service provider should be well-versed in tax compliance. Since laws are ever-changing and the frequent notices that employers receive are complex and confusing, many businesses end up filing incorrectly or late, or both. You must ensure that the provider will:
1. file your payroll taxes on time and accurately as the law requires
2. keep you abreast of changes to tax law since the client bears the full burden of ensuring compliance
3. submit your payroll taxes to the proper taxing authorities
4. support a method for the employer to verify that the taxes were filed appropriately and promptly.