In general, outsourcing payroll is essentially a shift in responsibilities from your office to a third party. These duties include using information such as employee work hours, bonuses and commissions, calculating tax withholdings and transferring funds into various accounts. The payroll services providers have the right to write checks, transfer funds into direct deposit accounts and pass out W-2 forms for end of year paperwork.
Generally, upon signing a contract with a payroll outsourcing provider, your company will create an account with the payroll provider wherein you deposit funds. Sometimes these accounts will have a minimum balance or require access to another bank account as a guarantee of funds. Regardless of the required minimum balance, most providers charge a fee based on the number of transactions, checks or deposits completed. This fee is taken directly out of this account is used to pay employees, tax withholdings, and pay various state and federal taxes. Setting up the account is a painless process. The payroll processing company will also need access to employee social security numbers, W-4s and I-9s as well as any banking information related to direct deposit.
The payroll services company may require constant contact with your company either through online software that they provide or by your company regularly “calling in”. These two methods of contact are used as a means of acquiring information related to bonuses, commission, sick and vacation pay, savings plan information and hours worked. Every payroll provider has a distinct procedure for gathering this method; some require this information be inputted in software while others have you call in the data several days before the actual payday. Employees can access to their accounts online (such as IRAs) and make changes. Make sure you are familiar with a provider’s procedure before signing a contract.
Once your company has set up an account and provided all of the above information, you can begin using the payroll services. Some companies offer a trial period or demo service before you actually sign the contract and it is highly recommended that you test it out. Understanding the payroll provider’s procedure for imputing information, whether it is by calling in or using their software, ensures that you are happy with the overall process.
Monique L. Myers is a writer, surf instructor and an art enthusiast based in San Diego, California. She writes extensively for Resource Nation and VoIP Service, both online resources that provide expert advice on purchasing and outsourcing decisions for small business owners and entrepreneurs.
