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Well, you’ve made it. It’s been a long time coming, but you sacrificed, worked hard, hired your employees and here you are.
The last step, paying those fantastic people you’ve entrusted with your life’s efforts, and the keys to the cash register.
However, upon first glance, this seems to be easier said than done. A quick search shows you that you have your pick of options when it comes to choosing a payroll service provider.
At first, every company looks like they do it all, but that’s really where your comparisons end.
Yes, most solutions are comparable “apples to apples” so to speak, because all payroll companies have to provide the essentials in order to be considered a payroll company in the first place.
For instance, features, like payroll calculations, direct deposit and/or checks, federal tax filing, pay stubs are basics. Most payroll companies can even handle state or local tax filings, as well as year-end reporting like W2s or 1099s, but those are the features for which you may need to pay more than the standard per processing or monthly payroll fees.
When picking a payroll provider for your small business, the most important question you’ll ever ask:
“Do I have to pay extra for this?”
Setup/Implementation Fees
While we don’t believe that you should pay a company to become their customer, it’s a fairly commonplace practice among payroll companies to charge a setup or implementation fee. Which is why you should always ask if there is a setup or implementation fee and if so, how much, what it entails and how long is it going to take to complete set up. You should also check if it’s a one-time flat fee or an annually recurring charge.
State & Local Tax Filing
All payroll companies can handle your federal tax filing, but it is worthwhile to confirm if you are responsible for filing and reporting your state and local taxes. And, if it is a feature that your payroll company does provide, are you paying extra for it? Asking these questions up front can help you plan your business finances more accurately, in case you hire employees in multiple states.
Direct Deposit and/or Manual Checks
Whether you choose to pay your employees via direct deposit or manual checks, it is recommended that you confirm any and all charges associated with that functionality. For instance, do you have to pay a per-employee charge to use direct deposit? Or, if your payroll company provides check printing and mailing services, are you being charged extra at a per employee and/or per payroll fee?
New Hire Reporting
As per the Personal Responsibility and Work Opportunity Reconciliation Act of 1996, all employers are required to report newly hired and re-hired employees to their state-specific directory within 20 days of their hire or rehire date. You should confirm if your payroll company can handle this type of new hire reporting on your behalf, and if there are any extra charges associated with generating and sending in the report.
Wage Detail Reporting
Similar to the New Hire Reports, the United States Department of Labor requires that all employers submit Wage Items/Records in a Wage Report. The report is essentially a list, organized by Social Security Numbers, to indicate who was paid in a quarter and their total wages for the quarter. Do you have to pay your payroll company extra to have this report generated and filed on your behalf?
Year-End Reports
If you hire employees and/or independent contractors, you have to provide them with a Form W2 and/or Form 1099 at the end of the year. You should ask if there are any extra costs to generate these year-end reports, or even if there are any delivery charges to send these reports out to your workers.
Change in Payroll Frequency
You may not anticipate this charge or think to ask your payroll company about this possible charge, but some payroll companies could charge you extra for switching your payroll frequency.
Delivery Charges
Banks are known to charge customers for getting a paper statement even if you usually get online statements. Similarly, you’ll want to confirm if there’s an additional cost for sending your employees online pay stubs or their year-end report.
Delivery Surcharges
A charge for the delivery charge. Don’t ask – we can’t even begin to fathom why these would exist, but they do.
Payroll Reports
After each payroll is processed, you should have access to some basic payroll reports like a payroll register, posting journal, tax withholding report, invoices, etc.
Most of these reports should be included in your monthly or per payroll processing fees, but if you need to generate any custom payroll reports, there might be an incremental cost attached to it, depending on the complexity.
You should also ask if you have to pay extra to get access to basic (or any custom) reports after you are no longer a customer.
Integration Fees
Like most small business owners, you probably use a different solution, like QuickBooks Online or Xero, to manage your company’s accounting/bookkeeping needs. While cloud-based payroll solutions don’t usually charge you for these integrations, larger payroll companies might, which is why you should ask if there’s a cost attached to integrating your payroll records with your accounting/bookkeeping solution.
Unless they have transparent pricing, all payroll providers have extra charges they don’t want to talk about until after you’ve signed on the dotted line. Speaking of which, if you are signing a contract with your payroll company, you should always be clear on the cancellation terms.
Nickel and diming isn’t fun for anyone, which is why it’s always best to ask the “Is there an extra charge for this?” question up front.
In this way, you will always know what your payroll processing costs are going to be each month, and there will be no unpleasant surprises when you get that invoice.
Disclaimer: The advice we share on our blog is intended to be informational. It does not replace the expertise of accredited business professionals.
