Top 10 Considerations When Selecting a Payroll Processing Vendor

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An organization’s payroll cycle is a critical and comprehensive business operation, beginning with the hiring and onboarding of an employee and not ending until that employee receives their final paycheck. Processing payroll can take significant effort, as it involves specialized knowledge of human resources, accounting, and tax compliance. Using a third-party payroll processing solution can greatly simplify the payroll process and contribute to overall efficiency. Selecting a payroll processor can seem daunting, as there are a substantial number of service providers available in the marketplace today. Careful consideration should be given to specific areas to help ensure a payroll processing solution best meets an organization’s needs.
Here’s a list of the top considerations an organization should make when evaluating and selecting a payroll processor.

1. Functionality & Scalability

A payroll processing solution should be easy to use and meet an organization’s specific objectives. Over time, those organizational objectives may change. While a payroll processing solution should meet the goals of today, it also should be scalable to grow with an organization to best meet the needs and objectives of tomorrow.

2. Accessibility, Uptime, & Security

As with most business processes, on-site payroll processing may not always be possible. Cloud-based payroll processing solutions provide organizations with the information and transparency they need to help ensure employees are timely paid and all tax and reporting requirements are successfully met. Platform accessibility, historical uptime, and the specific security protocols used to protect sensitive information should all be carefully evaluated.

3. System Integration

Integrating a payroll processing solution with existing systems is critical to improving efficiency and reducing repetition. Careful consideration should be given to help ensure that a selected services provider integrates with both timekeeping systems and an accounting system’s general ledger to facilitate the flow of information and eliminate manual entry. 

4. Complexity Considerations

The complexity of an organization’s payroll isn’t necessarily dependent on the organization’s size. An organization’s industry, workforce, fringe benefits, and reporting requirements can add considerable complexity for organizations of any size. Prior to selecting a processor, it’s important to compare the sophistication of an organization’s payroll to a processing solution to help ensure the service provider can appropriately service those complexities.

5. Customer Service

The mode through which customer service is provided can vary between service providers. Customer service can be provided over the phone or online. Some service providers assign a single point of contact for customer support, while others use team or call center approaches. Careful consideration should be given to help ensure that a selected processor provides the support and timing that will work best for your team and organization.

6. Tax Compliance

Processing payroll requires organizations to comply with federal, state, and local jurisdiction payment and filing requirements. The frequency and type of those requirements can vary by jurisdiction and can add a significant amount of complexity to the payroll process. Selecting a service provider with experience in each jurisdiction can relieve organizations of this added complexity through tax payment, automatic return filing, and monitoring.

7. Information Returns

In addition to periodic payroll tax return filing requirements, many organizations also have annual information return reporting requirements. Many payroll service providers assist their clients with information return reporting, including 1099 reporting and employer information return reporting associated with the Affordable Care Act’s employer mandate. Selecting a processor that can handle all reporting requirements can help consolidate service providers and reduce cost.

8. Human Resources

Not all organizations are large enough to employ dedicated human resources professionals. Payroll processing solutions can help provide employers with access to human resources professionals, literature, and documents to help ensure the start, maintenance, and conclusion of the employment process are appropriately managed.

9. Enhanced Accessibility to Benefits

Offering competitive benefits is a key feature of attracting and retaining employees. When an organization is in startup mode, its ability to offer competitive group benefits may be restricted by the number of employees. In addition to traditional payroll processing, several service providers also are certified professional employment organizations (CPEO). Using a CPEO can often enhance an employer’s benefit offerings and simplify the payroll processing cycle.

10. Employee Access

Processing payments to employees is no longer a physical process that is solely the employer’s primary responsibility. Payroll processing technologies now allow employees to directly participate in the payroll process through individual accounts that enable them to complete tax withholding and direct deposit forms and update their individual contact information. These accounts often allow current and former employees to access their paystubs and W-2s, eliminating the need for employers to reprovide them upon request. 

Reach out to your BKD Trusted Advisoror use the Contact Us form below if you have any questions about selecting a payroll processor that best helps your organization meet its human resources, accounting, and compliance needs. To learn how we can help you enhance business processes and improve your accounting operations, check out our outsourced accounting services.

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