Small businesses face challenges unique to them as compared to larger companies. Many of the services that a big corporation or other large business might handle in-house are things all businesses need, but not all have the budget, resources, staff, or expertise to manage them. For many small businesses, this is particularly true for administrative tasks. If the business is focused on providing a product or a service other than administration, then most of the staff is going to be focused on producing those goods or providing those non-administrative services rather than handling internal management. This is often where it falls on the owner to take up the reins, but one person can’t do everything themselves. This is where outsourcing comes in. 

Payroll Management Options

There are a few different options when it comes to payroll solutions for small businesses like yours. The first and cheapest option is to handle the responsibilities yourself. However, this comes with several drawbacks. There’s more to payroll than just writing checks. You need to keep records, provide documentation to the IRS, issue your employees’ tax forms when tax season rolls around, and know and operate within employer laws and regulations, among other things. Failure to meet legal requirements could lead to your company being fined or even getting into legal trouble.  


You can also hire a payroll manager to handle your payroll in-house. This does come with the benefit of accessibility, with a professional right there on staff, as well as direct control over your payroll service. However, it also means it’s up to you to choose a skilled, capable payroll manager, the same way you’re responsible for hiring staff for any other position in your business. Additionally, it also means you’ll have to pay the expense of having a payroll manager on your team. According to market research, the average payroll manager’s yearly salary is $86,147.  


Finally, you have the option to outsource your payroll to a third-party payroll service provider. A larger business or corporation might be better able to afford to hire an in-house manager to provide them direct control, but for a small business like yours, this is most likely your best option for a number of reasons. 


The Benefits of Payroll Outsourcing 

For somebody looking for payroll solutions for a small business, a third-party provider can offer several benefits:  


  • A payroll service provides a small business with an efficient, automated system. This allows the business to easily handle internal payroll matters so the staff can focus on the business’s core goals.  
  • A payroll service often provides additional services beyond payroll. This is important for small businesses that may need multiple administrative services outsourced; since the fewer separate providers they need, the easier and more efficient it will be. Additional services some providers can offer include HR or recruitment services, labor posters, background checks and more.  
  • A payroll service can help a small business adapt quickly to changes in the market, industry, and economy. As a company grows or consolidates, they need to make changes to the payroll, which a good payroll service can do quickly.  
  • A payroll service helps ensure legal and regulatory compliance. Third-party payroll providers are focused on not only providing the service but knowing all the requirements of an employer. The provider’s staff are experts on payroll laws; and keep track of them as they’re added, replaced, overturned, or amended.  
  • A payroll service helps a small business avoid paying payroll-related fines and fees. With a third-party provider, you have assistance to make sure all the necessary paperwork for taxes and other accounting requirements are provided on time and properly filled out. This makes sure you don’t end up paying overdue fees or other fines.  

What Makes a Good Payroll Provider?  

As you look for a payroll provider for your payroll solutions, it’s important to know what qualities to expect from your provider. While a payroll provider may provide additional services beyond payroll and tax preparation, not all of them do. Make sure you’re getting all, or as many, of the administrative services you can for your money.  


Efficiency and ease of access are also important qualities for a payroll provider. As you look over your options for providers, see what kind of access services they provide, such as mobile access and proprietary software/apps. Such services, when provided, will make contacting the company, receiving regular reports, and checking payroll records quick and thorough.  


A good payroll provider has to be knowledgeable about payroll regulations and laws. Make sure to verify their staff are familiar with the most recent payroll laws in your state, as well as IRS requirements for business tax reporting. You should also check to be sure the provider has a good reputation for maintaining confidentiality since it’ll have access to sensitive company information.  


Speaking of reputation, a good payroll provider should have an established reputation for quality service. While a new service provider may have the know-how and provide the services you need, you can’t be sure of the quality of that service without things like customers’ reviews or a track record of satisfied clients. Without an established reputation, you’ll need to dig deep into the nuts and bolts of the provider’s service methods and policies to determine if it’s likely to be able to meet your needs. 


Lastly, a good payroll service provider shouldn’t cost as much as hiring your own in-house payroll manager. One of the biggest advantages that a third-party provider offers a small business is that it doesn’t cost as much to hire them since they’re not providing services solely to you. If it would prove just as costly to handle your payroll in-house, that’s a good sign that the payroll provider won’t be a good fit. 

FAQs for Payroll Providers 

Sometimes the best source of information on whether or not a payroll provider can provide you with the payroll solutions you need is the provider themselves. A good provider will be ready to answer questions about their company and services since it does their business just as much good as yours to make sure you’ll be a good fit for one another. Some good questions to ask include:  


  • How often does the provider update its tax tables? Note: Ideally, providers update these tables anytime there’s a new tax bill going into effect.  
  • Does the provider have any other clients that are in the same industry as you? This gives you an idea of how much the provider may understand the needs of a business like yours.  
  • Can the provider work with the employee benefits you provide your staff? Different businesses have different policies regarding things like insurance, paid time off (PTO), and the like, so the provider needs to know if they’ll have to account for these benefits in their reports and records.  
  • How does the provider handle the growth of a business? If you’re going to be a provider’s client, they should be ready to adjust to your changing needs.  
  • What security measures does the provider use to keep your information confidential? This one is self-explanatory.  

In Conclusion

A small business needs to manage its payroll just as much as a large company but has fewer resources and often a smaller budget to do so. A third-party payroll service provider may be your best option, as it can provide multiple services, be cheaper than hiring an in-house manager, ensure legal and regulatory compliance, and provide other benefits. Make sure to know what you need and what to look for in a good provider, and don’t be afraid to ask a potential provider about their services directly to make sure to find the best fit for you.

Get Your Payroll Solutions from Payroll Vault

We at Payroll Vault are eager to speak with you about how we can handle your payroll, tax preparation, and additional administrative needs. We’re a payroll service provider with 15+ years of experience providing our boutique-style services to our clients. We offer not only payroll services but also HR, background checks, workers’ compensation, labor law poster services, and more. Find out more today by visiting our website to get a quote or visit your nearest Payroll Vault location!