How To Evaluate Whether A Payroll System Is The Best One For Your Company

Evaluating Payroll Systems

Published on March 10th, 2023

Payroll is such an integral part of business that one might think there’s a simple right and wrong way to go about it. Surely there’s one basic process that ensures employees get paid and tax requirements are satisfied, right?

There’s both good news and bad news when it comes to payroll system processes. The good news is there are numerous options that can provide businesses with capabilities that work best for them. The bad news is that with all those choices, it can be confusing to sift through all the options. Here are three questions you should ask to make sure you’re selecting the right payroll system for your situation.

1. Does It Support Your Future Plans?

Transitioning from one payroll system to another is a headache. It’s true whether you’re switching from in-house to third-party payroll or just switching between third-party providers. Rarely does everything go smoothly, so in general, it’s best to keep a functioning process in place for as long as possible.

When you’re evaluating your existing systems, you should consider whether or not they support your future payroll needs. For example, your current payroll might involve a handful of employees, all of whom live locally. If that’s the way you think your payroll will remain long-term, in-house or simple third-party payroll might fulfill your needs.

But if you are building momentum toward expansion in both revenue and workforce, you’ll need to look at future possibilities. Some businesses have been able to increase their pool of qualified candidates or save salary expenses by hiring international remote employees. If you want to have that option easily available, you should consider looking at global payroll providers.

Payroll providers that offer global payroll services can also handle your normal, regional payroll needs. If you want the option of hiring internationally but aren’t ready to do so, you can have the option in place early. That way, payroll runs as usual, but you can move quickly if international hiring opportunities come up.

2. Is It The Most Valuable Option?

Value is a tricky thing to determine. Some business owners make the mistake of only looking at the monthly cost of a service in terms of dollars. Other things to consider when calculating value are time and stress. While those are easily overlooked, some would say that they’re even more important in determining overall effectiveness and value.

That’s not to say you should entirely ignore how much something costs. If two payroll processors appear to have similar service packages but are miles apart in cost, further investigation is needed. One might offer additional services to justify the higher cost, such as time clocks or employee finance education. But if those services aren’t ones that you will use, they have no value. In that instance, the cheaper plan will likely provide better bang for your buck.

Some small business owners like the do-it-yourself aspect of keeping payroll in-house. In these situations, the owner or a designated employee cuts checks and submits payroll taxes. This process can be relatively easy if there are no retirement plan, insurance, or other non-salary payroll issues to consider. If the individual who processes checks is sufficiently knowledgeable, keeping payroll in-house might cut down on expenses and have no negative consequences.

But what if that person occasionally makes errors or finds him- or herself spending a great deal of time responding to IRS notices? Alternatively, what if employees really want online access to their pay stubs and other information? In any of these cases, offloading payroll onto a third party with a more robust system could be costlier but provide great overall value.

3. Are You Overly Dependent On One Person?

Especially in small offices, cross-training often gets overlooked because it’s considered to be expensive and time-consuming. But if only one person knows how to perform a function, things come to a screeching halt if that individual becomes unavailable. For some processes, a bit of a delay as things get figured out might not be a problem. For payroll, however, delays in paying employees and submitting information to government agencies can have major consequences.

So if you handle payroll in-house, you may need to update your systems and processes to include cross-training. Alternatively, written procedural manuals can be updated regularly and made accessible to the necessary parties.

Being overly dependent on one person isn’t limited to in-house payroll, either. Third-party processors can also be overly dependent on one person, and that can have consequences for their clients. Before you engage a third-party payroll processor, make sure that their account reps are required to take notes in a centralized program. Failure to do so can cause issues when a new rep is assigned to your company with no history of your account. That can result in payroll errors or time spent on your end getting the new rep up to speed.

Solid Payroll For Solid Business Processes

Other than delivering the actual products or services that create your company’s revenue, payroll might be your most important consideration. If your payroll processes are overly expensive, are prone to error, or endanger future plans, it’s time for a system overhaul. So take stock periodically and make sure you have the best payroll system for your business. By doing so, you can set up both your present and future for continued success.

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