How to Choose a Payroll Service

Spiegel recommends interviewing at least your top two or three payroll options before you choose. The following is a list of questions you should use as a basic checklist for those interviews:

•    How fast is turnaround?
•    If the service makes a mistake, who is liable for those mistakes?
•    How long does it take to fix a mistake?
•    Are there additional charges for adding or changing employee payroll?
•    Will the annual fees change or increase after one year?
•    How often will you receive reports from the service?
•    Do they offer retirement plans?
•    Can they integrate with your accounting software?
•    What back-office technology does the service use?
•    What are the hours and means of customer service availability?
•    Will you be assigned a rep or will you always be directed to someone new?
•    Is there an additional cost to file taxes in multiple states?
•    If data is re-entered, will I be able to review it before it goes through to payroll?
•    How often will I hear from you?

Dig Deeper: Outsourcing HR


How to Choose a Payroll Service: Take It for a Test Drive

Even the smartest questions can yield some not-so-truthful answers, so it's best to ask the service if you can talk to some of their clients. If and when you do, ask those clients about responsiveness, accuracy and how this service compares to others they've used in the past.

"If you're not using a national service, you want assurances that this local company has taken care of things," Carson says.

She also recommends calling the customer service department to see who you get on the other line. "Sometimes, when you're dealing with a national service, you get service that's as smart as the person on the other end of the phone," she says. "Sometimes that's a clerical person reading a script."

You should definitely get a price quote that includes fees for all of the services you mapped out. Get a quote for this year and next so if rates do change over time you'll know whether or not the service will stay within your budget.

Spiegel suggests looking over a copy of one of the company's reports. "Are they easy to understand or overly complicated?" he asks, noting that sensitive information like this needs to be relayed to you in language you can fully comprehend.

Likewise for any software or web platforms you'll have to use. Make sure it's a user-friendly interface that, if necessary, your employees will be able to access as quickly and efficiently as you can.

Dig Deeper: There's No Substitute for Great Customer Service


How to Choose a Payroll Service: Once You Choose

When you sign a contract with a payroll service, Spiegel says you need to know what will be required of you, as well.

Have organized files ready with employee names, addresses, wages and any other deductions they're eligible for. For direct deposit, you'll need voided checks from your employees, and your staff may also have to fill out new W-4 forms, available here.

You should set a schedule determining when you will check in with the service and how often you'll get their reports. Keep an eye on your bank account and make sure there aren't any drastic changes once the payroll service picks up. Darrow says some businesses even continue running their old payroll systems for the first few pay cycles to make sure the numbers match up.

Finally, if it turns out your service is not meeting your expectations, the best time to switch, according to Darrow, is either at the beginning of the year when your pay cycle starts with a clean state or at the end of every quarter when your quarterly reports are already in order from your last payroll service.

Dig Deeper: Payroll Analysis Spreadsheet


How to Choose a Payroll Service: Resources

For the IRS's list of payroll services that have passed their Assurance Testing System, click here.

For price quotes on nationwide services, visit BuyerZone's website.

For the IRS's employer tax guide, click here.