What You Need to Ask When Choosing an Online Payroll Provider

One of the first things any financial consultant will explain to a small business is that managing payroll is very different from managing the company books. Tax laws in every state are constantly changing, and you need someone in charge of your payroll who can adjust your company’s payroll and reporting requirements accordingly.

In order to avoid errors that can result in paying fines and fees to the government for improperly submitting your employees’ payroll records, many small businesses choose to hand over payroll management to an online payroll provider.

Before you sign up with the first company that appears in your search engine results, there are a number of important questions you need to ask yourself, your business accountant, and any company you are considering choosing to take over your payroll needs.

Managing Taxes, Benefits and Compliance

The cost of doing business in any state in the United States include the taxes a company is obligated to pay for their employees. Income tax, Social Security, and other state and local taxes must all be accounted for by your payroll provider, or you will wind up paying for any shortfall or face fines due to accounting mistakes. More importantly, your online payroll provider should be able to demonstrate that they are up-to-date with all relevant tax codes in your state so that you are not overpaying unnecessarily.

If your company offers a 401K retirement plan, your online payroll provider should also be able to manage and track your employee retirement benefits.

Data Management and Security

Managing your company’s payroll data falls into two main categories: the ability to manage historical payroll information from your existing systems, and the ability to integrate the payroll system with human resources, finance, or any other departments that require accurate and up-to-date payroll information.

If you’ve been managing your company’s payroll in-house up until now, you’ll need to let any potential online payroll provider that you’re considering for your business know what system you’ve been using up until now, and find out whether they will be able to incorporate your existing system data into their online payroll system.

You should also find out from any potential online payroll provider how secure their services are. Beyond having a secure web connection, ask about what security is being applied to their servers, their backups, their employees, and their vendors. It’s your responsibility as a business owner to ensure that your employees’ private financial information is as safe and secure as possible.


In today’s business market, fewer and fewer businesses are being run in the traditional sense. Flexible time, flexible hours and other work allowances mean that fewer and fewer employees have a strict 9 to 5, 5-day a week work schedule. Your online payroll provider must be able to provide a wide array of methods for calculating work time and to apply different scheduling permutations to each employee as needed.

An online payroll provider must be able to print and mail checks and provide direct deposit services, depending on the needs and preferences of the individual employees. They must provide a web-based payroll portal so that your employees can log in whenever they choose and see their total hours worked, including any overtime they may have accrued. Any payroll company that provides a mobile app is worth serious consideration, as today’s workforce is more mobile than ever.

Another important factor to consider, especially if your workforce isn’t very tech-savvy, is whether or not any online portal is easy for employees to use. Top online payroll services usually offer an online demo that you can test with several of your own employees to see if they’re comfortable using the online system. This may be the most important test you’ll run to see if the system is relevant for you.

Additional Services

In addition to simple payroll management, online payroll service providers may offer other services to help you manage your company. They may be able to offer full HR services, time clock services where employees can clock in and clock out through an online interface, shift scheduling, and more. Be sure to ask which services are included in the package you’re interested in, and how much more these features will cost if you want to add them later.

Pricing Structure and Costs

It’s important that any payroll service provider give you a clear and concise figure when it comes to their pricing and supplemental costs. If a payroll provider offers service tiers based on the number of employees you have, you’ll have to look at your long-term strategy to determine whether it will be cost-effective for your business in the long run. for instance, if you budget for your current number of employees, and in three months your payroll system would go up due to new hires, you may want to talk to providers about a rate freeze for the first year.

Industry Specialization

If your company is part of an industry that requires payroll specialization, find out whether each of your candidates can meet the specific needs dictated by your industry. Especially in industries with heavy government regulation, you need to make sure that your company is in full compliance with all laws and regulations with regard to payroll. Any payroll provider that has experience in your industry should be able to provide references and examples without violating confidentiality. If you have friendly relations with other businesses in your industry, it might be a good idea to ask them which payroll service they’re using and whether or not they’re happy.

Managing payroll is the sign of a healthy and growing small business. Take your time in evaluating which online payroll providers work best with your existing system, are easy to use by your employees, and are affordable so that your company can continue to grow and succeed.

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