6 Decision Factors When Outsourcing Payroll

Not all businesses are created equal and even the best payroll provider in the market may or may not fit your specific needs, in this article we’ll go through 6 decision factors when outsourcing payroll. Now you are an expert in your business, but maybe not in payroll. It, therefore, becomes imperative that they contract other companies, firms or individuals with the right infrastructure, experience, and expertise to do their payroll for them. There are therefore some important factors that you need to consider when choosing payroll outsourcing services.


When deciding on a payroll outsourcing provider, the cost of the payroll outsourcing service is a top priority for most small businesses. You want a payroll provider who is not only affordable but also gets the job done. So for a lot of small businesses, the first question that will likely spring to your mind is: how much will it cost, because there are so many different pricing structures. It’s not always easy to compare most providers as they charge a flat monthly fee, plus an additional fee for each employee, but be careful because there can be an extra cost associated as well. For example, some service providers will charge fees for initial setup, paying employees in multiple states or even generating tax firms such as W2. There might be also additional charges for tracking paid time off amending payrolls in case of any clerical error or getting help with the IRS notice. Before you get started, make sure you outline everything you’re going to need from your provider so that you can get a more realistic sense of how much payroll will cost you.

Payroll Taxes

Now make sure that the payroll service provider that you choose should be able to process taxes both at the state and federal level tax deduction and filings. Be sure to ask any payroll outsourcing providers that are based out of your business state if they have the capability to handle different regulations of taxes in your area. Also be sure to mention to your provider if you have any employees that are working out of state, if you have any contractors or part-time employees, make sure that you’re able to view all the deductions in the customized report. Know what actions that the payroll provider will take if any mistakes or errors are being made, knowing all the small details will definitely help you in deciding whether the provider you’re looking for is capable of handling the taxes properly for you.


Imagine a scenario where someone gains access to your employee social security number or other personal information. Now that sounds like a terrible nightmare for both employer and employees. When choosing payroll outsourcing provider, make sure you know how the provider is going to secure employee information and if the payroll service is bonded insured and includes high-end security encryptions, like they have with banks. That way, you can trust that the information is safe and secure.

Customer Support and Migration

Now payroll never really takes a vacation, so it is crucial for any good payroll outsourcing provider to offer strong customer support when you have problems or questions. When determining the level of support offered by a payroll outsourcing provider, some questions to ask include what professional payroll certification does a customer support have? Will you receive a dedicated account manager or team? Is the support staff available via chat, Email, phone? Are they available 365 days 7 days a week 24 hours or are they are available for a limited amount of time? What is the average response time for support requests? Also, keep in mind if you’re moving from one support service or one provider to another, don’t forget about migration. It can seem like a small thing, but handing over the keys to process people might really test your employees’ patients. Are you going to have to input all of your employee’s information yourself? Is your payroll provider willing to help you migrate to their service or provide any service or resources to make it easier for you? This can be pretty stressful part of outsourcing payroll. You should make sure you know exactly what you want or what to expect upfront.


Now you definitely want to stay away from payroll outsourcing providers who are unwilling to partner or integrate with other HR or accounting platforms. Now, when a payroll provider service is easily integrated with other types of accounting or HR platforms, you are afforded greater flexibility, more control, and better results. Similarly, it is also important for the payroll provider to partner with workers compensation and benefit providers that understand small business needs in order to provide a complete payroll package possible.

Free Trial

The last piece I would like to cover is a free trial. When you find a payroll outsourcing provider you think will work for your business, check to see if the payroll provider you’re considering offers a free trial. The free trial allows you to learn the system with a hands-on approach and temporarily run your payroll at no cost to you. This way you can test out the features, get an idea of their user experience as well as customer service. Now, the winning provider should offer a healthy balance between functionality, price, customer service and user experience.

Choosing a payroll service provider does not have to be difficult. It’s all about comparing the leading service providers out there in the market, deciding on which payroll outsourcing service is right for your business can depend on the number of factors that we discussed in this article. I hope you found this article on the 6 decision factors when outsourcing payroll useful.

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