10 Questions to Ask When Choosing an Online Payroll Provider

The use of traditional, painstakingly manual payroll systems are on the decline, and for good reason -- they're repetitive, complicated and prone to human error.

If you're tired of slogging your way through payroll by hand, it might be time pass the tedious task off to an automated online service. Switching to a cloud-based payroll solution can reduce costs, minimize mistakes and free you up to focus on growing your business, says Joshua Reeves, co-founder and chief executive of ZenPayroll, a cloud-based payroll solution provider headquartered out of San Francisco.

Here are 10 essential questions to ask when shopping for the right online payroll provider for your company's needs:

1. What specific payroll services do you provide?
There are more than a dozen cloud-based payroll services to choose from, with additional providers arriving on the market relatively often. To choose a service that's a strong fit for your company, identify your specific payroll requirements and search for a vendor that delivers everything you need.

Most of the leading cloud-based payroll providers, including Intuit QuickBooks, ADP, PAYCHEX and ZenPayroll, for example, provide an array of automated online payroll services, complete with access to a range of customized, one-click accounting reports.

A reputable, full-service vendor should provide the following:

• Pay hourly, salary and contract employees via direct deposit. Some vendors enable you to print paychecks on site as well. Others, including PAYCHEX and ProPayroll, can also mail printed checks to you.
• Handle new employee reporting.
• Track paid time off (PTO) accrual and use, including vacation and sick days.
• File accuracy-guaranteed payroll taxes.
• Deduct benefits, including health and insurance benefits.
• Deduct 401(k), Flexible Spending Account (FSA), Individual Retirement Account (IRA) and Health Savings Account (HSA) contributions.
• Handle various earnings and deductions, like bonuses, reimbursements, commission, tips and garnishments.

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2. What is your pricing structure?
The majority of online payroll providers charge a base monthly subscription fee, which can generally range between approximately $12 per month to upwards of $200 per month, depending on the breadth of services you opt for. On top of your monthly fee, you can also expect to pay anywhere between $1.50 and $5 per month per employee.

Several providers offer free trials, which typically range from one to two months in duration. That way you can test-drive the service before committing your hard-earned cash.

3. How will I get set up?
Once you decide on and sign up with an online payroll vendor, you should be able to immediately log in to your user dashboard, configure your account, and add employees and users. You should also have the ability to access your account and run payroll from any internet-enabled device, including your laptop, tablet or smartphone.

4. How does your service handle payroll taxes?
In addition to payroll processing services, a good online payroll service should also handle all of your payroll tax compliance needs accurately and on time, Reeves says. That includes federal and state income and unemployment tax and state unemployment insurance.

The vendor should also process your year-end 1099 and W-2 forms for your employees.

Reeves cautions that business owners should be "wary of providers that charge extra fees for calculating, paying and filing your payroll taxes or require you to go into their applications to do all of these actions on your own."

Instead, he suggests seeking out a full-service provider that can take care of all of your government tax compliance requirements, including state and federal tax payments, quarterly and annual filings -- automatically and paperlessly -- with no actions required on your end.

5. How secure is your service?
Being completely confident that your company's private accounting information stays out of the hands of hackers is paramount when it comes to storing your sensitive, critical payroll data in the cloud. You'll want to verify that vendors keep data safe using the highest encryption standards available, including something called 256-bit Advanced Encryption Standard encryption, which helps defend against login and password theft.

Most modern online payroll solutions leverage the same security technology that online banking services use, Reeves says. All of your account information, including passwords, social security numbers and personally identifiable information should also be protected by firewalls and two-factor authentication. Additionally, it should be continuously backed up to multiple secure locations throughout the day, every day to ensure that your information is available no matter what.

6. Where is your data center and how safe is it?
It's important to know how a potential online payroll provider protects its data centers -- which will hold your sensitive financial information -- from break-ins and natural disasters.

They should have multiple layers of security, including biometric scanning for controlled access, as well as keycard, retina scan and PIN number restrictions. Also, security cameras should monitor all of the provider's locations around-the-clock, along with onsite staff to protect against unauthorized entry.

7. What customer support services do you offer?
Business owners should expect live, real-person support via email, phone and chat, in addition to detailed online FAQs and tutorials, Reeves says. If you expect 24/7 customer service, even on holidays, be sure to ask if the vendor can accommodate that.

However, if you're calling a support line on a regular basis, then that means the product is not doing its job, Reeves warns. "If you choose an online payroll solution that's designed to be simple and has an easy-to-use interface, payroll should just work."

8. Will my employees and contractors be able to access their payroll information?
They absolutely should be able to, without exception. Online payroll providers usually give employees and contractors personal portals where they can access their pay stubs, Reeves says.

ZenPayroll, for example, offers employees self-onboarding, lifetime employee accounts so they can access their pay details forever, and the ability to edit their own employee details.

9. Will I be able to integrate my existing accounting systems with yours?
Most online payroll solutions should quickly, seamlessly integrate with today's most widely used small-business accounting software systems, such as Sage 50, Xero and Quicken.

You should be able to connect your existing accounting software directly from your online payroll provider's user dashboard. Once it's integrated, you won't have to manually enter or reconcile payroll again.

10. Can your service scale up to meet my business needs?
Your payroll needs will grow proportionate to your business and staff growth, so you'll want to make sure that your online payroll vendor offers the ability to add additional users and employees to your account.

To ensure that the vendor can handle your needs over the long haul, ask which added services can be offered over time and for how much.