Finding The Right Payroll Services For Your Small Business

Andrew DePascale

It’s the end of the year which means many small businesses are re-evaluating their models, operations, and the service vendors they work with. Due to its calendar-driven nature, payroll services happen to be one of the most popular services small businesses re-evaluate at year-end.


Millions of small businesses currently rely on online payroll services to save them time and assist with human resources. But if you're a new small business with first-time employees or already established and looking for a better fit, how do you decide on which payroll service to use?


You might do some research online, seek recommendation from your accountant, or even ask some neighboring small businesses.


All of these sources are helpful starting out, but can become overwhelming to decipher. As a small business owner, you need a customized solution that meets you and your employees’ needs since only you know how your business operates.


Where We Come In

Being in the industry for over ten years and meeting over a thousand small businesses, we’ve developed an approach that small businesses can take to find the right payroll service for their specific needs.

Based on industry knowledge and experience on Main Street, we’ve curated the main criteria a small business can use. Our goal is to help reframe your thinking from finding the “best payroll service” (which doesn’t exist) to finding the right payroll service for your small business, your industry, and your direct needs as a small business owner. At Payroll Setup, we help you set up payroll with the right payroll service for you.

There are many factors to consider in which payroll & human resources partner is right for you. Below are our top ten that we feel are the most helpful when deciding on which payroll service to use. 


1. Prioritize Stability

Boiled down to its core, a payroll company is really an organization you entrust to move funds and report data to the government on behalf of your business. When you do this, you relieve yourself of the burden of dealing with the rigors of payroll, and free up more time to run your business.


Payroll service firms and online payroll software are responsible and capable of taking care of millions of dollars in client payroll funds. When navigating the crowded sea of payroll services, it's important to look for this number one criterion, which is stability. 

You want to make sure the firm has the proper financial controls and the back end systems to remit and file taxes with the IRS and state agencies…and of course, pay your employees on time! 

Larger, publicly traded payroll companies have a “moat” around this because being a public company comes with added transparency and financial controls. Make sure the payroll company is stable and insured, just as you would with your bank.


2. The Payroll Set Up or Conversion Process

Setting up payroll for the first time, or changing payroll services, requires time, employee data, and other variables. As a small business owner with limited time before you enter into any new agreements or contracts, you want to ask your payroll service what the payroll setup process or conversion timetable will look like.

After sales, the first impression a payroll service makes with a new client is implementation. This should be a smooth process for both you as the business owner and for your employees.


For example, when the payroll service does change over, employees should be told ahead of time about changes in their normal payroll routine. If they are used to logging into a certain payroll system to retrieve their pay stubs or request time off, any change in their routine should be explained ahead of time.


Changing payroll services anytime other than January 1st requires proper communication with both your current and new payroll service to ensure accurate handling of tax liabilities. 

A good payroll representative will explain this thoroughly, and walk you through exactly how their payroll setup process works, and any short term impact on your cash flow. 


3. Location

Location, location, location can also apply to payroll services. Many small businesses prefer to work with a trusted representative in their town, or a locally owned payroll service for familiarity and additional accountability. If developing a 1:1 relationship with your payroll service is important to you, then proximity might be a high-ranking factor in your decision-making.


4. Customer Service

Small business owners wear many hats and need to get in contact fast. They also expect their vendors to have their back and be responsive when they have questions or needs. A payroll service company is no exception.


As the payroll company scales, maintaining fast and quality customer service is a challenge due to the complex nature of payroll. The industry is fast-paced and ever-changing, employee retention fluctuates, and laws and regulations change. As a growing small business, you’ll understand this, but still need to be serviced promptly and efficiently. Look for reliable customer service when vetting payroll providers.


5. Easy, Reliable Software

As a small business, you’re most likely logging into an online payroll portal each pay cycle to process payroll and view reports. Employee self service makes everyone’s life easier as well, with mobile apps being a real plus. When you make the switch, look for software that’s consistently easy to use and is updated often. 


6. Industry Capabilities

If your business is in a certain industry that requires extra reporting, or added technical capabilities based on how the physical business operates, there are other additional items to consider.


Here are two examples:


- Construction Company

A construction company may need detailed reporting across different job sites, such as job costing and labor distribution, or certified payroll for government jobs. Finding a payroll service that can accommodate this advanced reporting may be a top priority. We recently met a great team at Miter Payroll solving this issue. 


-Restaurant or Bar

At busy restaurants or bars, there are various point-of-sale stations where staff place kitchen orders and settle customer tabs. They may also clock in and out on these devices, onboard new employees, and disperse tips.


The online payroll system is often part of this hardware, and should be a top consideration based on the daily flow of business operations. Changing this operational flow might not be worth it just to save money or other trivial factors.


7. Integrations for Accounting, Insurance, etc.

Payroll data feeds into many other areas of a small business such as accounting and insurance. Since labor is a big part of a small business's profit & loss (P/L), when an online payroll system integrates easily into an accounting ledger, you save time on administrative tasks. 


If your state requires worker’s compensation insurance, the insurance premium cost is also tied to the payroll data. Retirement contributions and health insurance deductions are also tracked each payroll cycle. Integrations make things easy!

8. HR Support

 It’s no secret that the pandemic dramatically shifted how people live and work. It accelerated an already unstoppable trend of remote and alternative working arrangements.


Every small business should at least have a basic HR foundation. Key documents such as handbooks, codes of conduct, job descriptions, employee records, and other policies are vital to protect the business interests.


The standard of HR in a company influences employee retention and the company's reputation. If your employees feel like there is no structure and they are just tossed into a work environment, that will translate into how they perform and view their job. 

Once your business gets to a certain scale, choosing a payroll service that can help support your people can go a long way.


9. Price Transparency

 Knowing what things cost is important to every small business. With inflation on the rise in the past few years, consumers are more aware than ever of increasing costs. Like most commodities, there is a red ocean of competition revolving around payroll pricing.


Almost every payroll service will offer some sort of introductory offer (especially at year-end) to win your business and make a financial case to switch to them. If you’re having major cost issues with your current payroll provider, then price transparency may be the top item on your list. 

However, despite the lure of lower prices, don’t skimp on payroll services! Paying your staff on time and dealing with government obligations is no joke. It’s an investment in the structure of your business, employee retention and satisfaction, and the legality of your operations. 

It also costs money to build and maintain good software and other reporting tools mentioned above. Know your costs, but don’t let price solely influence your decision making.


10.Recruiting and Retention Efforts

As mentioned above, the pandemic accelerated many labor market shifts. Organizations are struggling to recruit and retain talent. Many payroll firms are capitalizing on this by helping their clients find talent via recruiting platforms, and also retaining workers with added benefits and employee wellness programs.


If you’re seeking new employees or trying to retain the ones you have, finding a payroll firm that helps with this process is a good idea. 


 Quality payroll services for small businesses are crucial for smooth operations. As a small business, few things are as frustrating as changing payroll services and having unexpected delays, poor communication, or issues with an employee’s paycheck. 

Ask about which factors are most important to you ahead of time, and weigh the cost of switching not only from a monetary standpoint but also your time.


We’ve spent a great deal of time at on this process and are still refining it by carefully listening to small businesses on Main Street and supporting the payroll services in our network. 

We’ll help find the right payroll provider for you.