Payroll Partner or Payroll Vendor: Choose Wisely

Originally Published in HR News November 2017 Issue

Written by Pamela Evette

Across all organizations, payroll is generally the single most-expensive line item and has the most complicated compliance requirements. While some organizations have the internal bandwidth to effectively manage this process, most do not. The demand for easy payroll management options has led to an explosion of choices.

From do-it-yourself software and online payroll processing to large payroll-only vendors and companies that can manage all your payroll and HR programs and systems, the selecting the most-appropriate service provider can seem overwhelming. Despite some industry claims, there is no one-size-fits-all solution. Making the right choice requires understanding what services each potential vendor or partner offers to address your organization’s specific needs.

Vendor Options

Payroll Service Providers – PSPs only handle payroll. They range from online vendors to large brick-and-mortar companies. The most basic PSPs operate in the cloud, meaning the organizations they serve do not purchase or install any software. Payroll can be managed from anywhere, and typical services include payroll processing (including overtime, holiday pay, taxes and benefit deductions), filing and paying payroll taxes, new hire and payroll reporting, paid time off management and employee self-service. Many online PSP access their clients’ existing accounting software, enterprise resource planning systems or human resource systems.

Brick-and-mortar PSPs typically offer slightly richer and more automated services and perform tasks without requiring the employer to run reports or queries. They also offer the confidence of working with a larger organization, which is important to many smaller employers.

The greatest benefit of using a PSP is that the payroll processor does all the basic work—payroll deductions, tax payments, end of year tax forms and the like—quickly and easily. However, there are vast differences in the level of service provided by PSPs.

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