6 Ways to Avoid Choosing the Wrong Payroll Provider

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HR Insights for ProfessionalsThe latest thought leadership for HR pros

Wednesday, January 19, 2022

Finding the right payroll provider could prove crucial to the future success of your business, so make sure you're following a clear process to avoid a costly mistake.

Article 4 Minutes
6 Ways to Avoid Choosing the Wrong Payroll Provider

Outsourcing your payroll management to a third party can provide a range of benefits, including:

  • Cost and time efficiency
  • Compliance with the latest rules and regulations
  • Reduced need for internal admin and training
  • Lower risk of errors and omissions

To maximize these advantages, you need to work with the right partner. So what can you do to make sure the payroll provider you choose is the ideal fit for your company?

1. Know what features you're looking for

Different vendors will have different strengths, service features and solutions. Some will go beyond the basics of payroll processing and tax administration with extras such as:

  • Management of paid time off and leave
  • Detailed payroll reports
  • A range of payment options

Make sure you go into the process of researching and comparing suppliers with a clear idea of the services that are absolutely essential to your organization, what would be 'nice to have' and what you could do without. This will make it easier to narrow down the available options and to make sure you don't end up paying for features you don't need.

It's also important to consider factors such as ease of use and how well any new software and systems will combine with the technology you already use.

2. Be clear about the division of responsibilities

Another key point you should be absolutely sure about before entering into a relationship with a payroll provider is what tasks they will take on, and what you will need to do yourself.

Does your supplier clearly state they can keep you up to date and in compliance with the latest tax laws, for example, or will an employee within your business need to assume responsibility for that? Will they look after the storage and management of data, making sure sensitive details are safe and managed in line with modern privacy and protection legislation?

It's crucial to consider questions like these and to be entirely clear about the division of responsibilities before starting any new partnership.

3. Think about more than price

Price is an important consideration when you're acquiring any product or service for your business, and it's certainly something you'll want to take into account when evaluating payroll providers.

However, you should be careful not to prioritize price over every other factor. Simply going for the cheapest option could mean that you miss out on key features that generate real value and benefits for your business.

It's crucial to bear this in mind during sales calls and meetings. Sales reps working for payroll suppliers might promise low prices and discounts to secure your business, but don't let that distract you from asking whether this is really the right product for you.

4. Don't assume big brands are better

Businesses and consumers alike often prefer to buy from familiar brands that have an established reputation and plenty of money to spend on marketing. However, if you buy on name alone, you could find yourself paying a premium for a payroll service that isn't the best fit for your organization’s unique needs.

A smaller provider that has a strong understanding of your sector or geographical area could be the ideal choice to manage your payroll, even if they're not a well-known name.

5. Ask the right questions

Before going into any sales call or meeting with a potential payroll supplier, make sure you're prepared with some targeted questions that will help you decide whether the service on offer is the right choice for you.

For instance, you might want to ask:

  • How do you stay up to date with changing tax legislation and ensure your processes are compliant?
  • Do you work with other clients in our industry?
  • Can your software and services integrate with other aspects of our HR function, such as managing employee benefits and paid time off?
  • What security measures do you use?

The answers to these questions will help you gain a better idea of whether this provider is the right partner for you and how they're different to their competitors.

6. Don't rush the process

Starting a relationship with a new payroll provider is a major step that will have an impact on your firm's future performance, productivity and results. It's crucial, therefore, to give yourself sufficient time to consider your options and evaluate prospective suppliers before making any sort of commitment.

You shouldn't rush into any stage of the process, whether it's deciding on the vendor you want to use or incorporating new software and services into your everyday operations.

When you reach the stage of adopting a new system, it can be risky to fixate on particular dates and deadlines for implementation. If it becomes clear that your intended go-live date isn't going to be feasible, delaying the launch is preferable to rushing into a transition that you're not ready for.

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