Smaller companies may be typically tempted to process payroll using a manual, in-house payroll system. It does appear as an easy and inexpensive alternative to expensive payroll outsourcing fees or pricey software packages that are available in the market . However, manual payroll systems can result in inaccurate payroll processing. Manual systems have no built in processes to catch mistakes. These are usually more time consuming than software payroll processing because all calculations must be done manually, opening the door for mathematical errors.
Many managers view payroll processing as a necessary task that doesn't add value to the company. However advanced payroll systems are better at providing additional data and analysis to make the payroll information useful. There are more than a dozen payroll systems to choose from, with additional providers arriving on the market relatively often. Before going for one, first understand the needs of the organization. Do you need time and attendance solutions, payroll processing solutions, tax solutions? What is your budget?
Here are some of the critical questions you’ll need to ask to determine what type of payroll service will work best:
1. What are the types of services that payroll companies provide?
To choose a service that's a strong fit for your company, identify your specific payroll requirements and search for a vendor that delivers everything you need. Some payroll service companies provide an array of automated online payroll services, complete with access to a range of customized, one-click accounting reports.
Some of the payroll features that are essential:
- Ability to pay hourly, salary and contract employees via direct deposit
- Ability to print paychecks on site as well as mail printed checks to employees
- Accurately track paid time off including vacation and sick days
- Ability to handle various earnings and deductions, like bonuses, reimbursements and commissions
2. What is the cost of implementing a new payroll system?
Though pricing varies by service and number of employees, you need to make sure that while implementing a new payroll system, you know whether you're being charged by the month or by the pay period. Do make sure the offerings meet your list of needs, but don't be fooled into buying more than you need just so the payroll service can make some extra money. Several providers offer free trials, which typically range from one to two months in duration. That way you can test-drive the service before committing your hard-earned cash.
3. Are their any additional costs?
Some companies operate in multiple states to make the best use of local talent. It doesn’t make sense to have a separate system for each state. If you are going for one payroll system to help you manage payroll across all states then you need to check if there are any additional costs to file taxes in multiple states and whether the payroll system has the capability to manage it.
If there are any additional charges for adding or changing employee payroll, they should be declared upfront. Smaller companies need to particularly keep a close tab on all their expenses. In a bid to grow at a rapid scale, the number of employees are sure to increase which may lead to an increase in payroll services charges as well. Thus the new payroll system should be scalable as well.
4. How secure is the new payroll system?
Maintaining security and confidentiality is one of the first concerns a company has while outsourcing its payroll information. Thus the payroll system need to ensure that it follows strict standards to protect sensitive information and maintain confidentiality. Although in most cases, this information is more secure within the system than with the company itself as that is the USP it is built upon.
5. Does the payroll system have an efficient product support?
The payroll system is critical to your business so it is important to have a capable support made available to you whenever any problems/challenges may arise. It could be phone support, email support, on-site support, or all of the above. You need to also check if this support is available only within business hours, or even during off hours and weekends. It is ideal for you to choose a vendor that also provides local support. It will greatly benefit you to be able to coordinate with a team that understands local tax rules, policies, and the general landscape your business operates in.
What are risks of implementing a new payroll system?
Typically a new payroll softwares is installed on just one machine and managed by that computer’s owner. In case that system crashes, the entire process may suffer to the extent that the payroll admin is not able to process anyone’s salary until everything is sorted. The result could employees get disgruntled and their productivity is hampered to a great extent. In addition, depending on the complexity of the software, the employer may have to pay for training for the payroll staff. This system can prove expensive in that may require the employer to pay salaries and benefits to the payroll staff, plus pay for technical support when software glitches occur.
As with everything, there are various pros and cons with implementing a new payroll system in any organisation. Thus, the management needs to be careful with selecting a system that balances out these pros and cons and provides sufficient value to the company.