The growth of competition in the payroll check-writing industry has benefited companies in two key ways: The service now costs significantly less than in the past, and it includes significantly more.
"The minimum cost [five checks or less] used to be $25 to $28 a pay period," explains Thomas Golisano, president and founder of Paychex Inc., in Rochester, N.Y. "Today it's $9." The price is also reasonable for companies that have more than the minimum needs, as Deluxe Service Systems Inc., a $2-million janitorial services company based in Mission, Kans., recently discovered. "We pay $100 to $130 every two weeks," says Karen Barnum, business manager for Deluxe, which employs about 200 people. That amount "is less than we would pay if we did the work ourselves."
In addition, check-writing companies now prepare federal, state, and local payroll tax returns. They keep tabs on sick pay, vacation pay, pension-plan contributions, and even employees' tips. And they are easier than ever to use. In the past, the companies had to provide payroll information in writing. Now Barnum simply picks up the telephone, dials Paychex's number, and reads off the hours each employee has worked during that pay period.
Paychex, which has 48 offices nation-wide, says that as many as 1,500 new small businesses are signing up for its services each month. Check-writing services are also provided by a number of financial institutions, including Bank of America in San Francisco and Lane Banks in Chicago.
The system has even won praise from accountants. W. Thomas Frogge, a practicing CPA in St. Louis, recommends outside payroll check -- writing services to all his clients -- including himself. He has been a Paychex customer for more than a year.