6 Key Steps to Choosing a Payroll Provider


One of the most invisible and yet visible elements in an organization is payroll. Invisible in that most of the employees do not know, or necessarily care, what is involved from a back-office perspective. Yet, it is highly visible since every employee needs to be paid and will certainly notice quickly if they are not paid or if their pay is incorrect.

If you are the person tasked with leading payroll or determining whether or not your organization needs a new payroll provider, this post is for you. In my experience, like many provider selections, these changes are often entered into too quickly and with less than adequate investigation. This list will give you guidance on some basic steps you must take in order to have a successful selection process.

1. Understand the needs of the organization. Do you need time and attendance solutions, payroll processing solutions, tax solutions? Maybe you need all three or a combination of two. What is your budget? These are some of the critical answers you’ll need as you start to think about what type of payroll service will work best.

2. Know what type of payroll service works best for your organization. Are you going to do payroll in-house with a vendor or do you want the vendor to provide all the payroll services? Do you already have a payroll staff or are you going to hire them? All these questions are important to have answers to before you start talking to the providers.

3. Check out the vendors. Ok, shameless plug for Brandon Hall Group memberships, but having access to our KnowledgeBases is definitely the easiest way to pull information on various providers and compare them side-by-side. If not, you’ll be determining what to include in your RFP and then will need to determine which vendors provide the types of solutions you need.

4. Demo, demo, demo. Did I mention demo? As a former HR leader who supervised a payroll department, I can tell you that there are so many intricacies to payroll that you’ll want to see the provider solutions in action. This is one area not to skimp on. The time you spend will be well invested and will help ensure you get a solution that best matches your need and your budget.

5. Ask all the right questions. Be sure to ask how well the solution will integrate with your existing systems, how secure is the organization’s data, how long it takes to implement the system and what resources are necessary. You’ll want to know every detail on pricing too. Different providers handle pricing differently so be sure to ask how much it will cost per employee or per transaction. Also, dig in on which fees are part of the cost and how much the “extras,” like tax services, will be.

6. Ask around. You’ll need to spend time talking to references. Much like the demo stage, this is not one to skip. Also, don’t just call and ask a few easy questions about their satisfaction with the provider and the payroll system they selected. Be sure to ask how the provider responds when things go wrong, because they will. Ask how responsive providers are, how quickly they resolve issues and if they are available for questions. Give examples for them to respond to, like how providers respond when a group of employees is not paid correctly due to a system error, or if state taxes are not handled properly.

Once you’ve taken all these steps, you should feel confident that you’re ready to make your decision. Keep in mind that going through all these will take more than a day or a week. It will involve some level of commitment and time in order to adequately gather the information for the decision.

If you have questions, add them in the comments or contact me at [email protected] or @TrishMcFarlane.

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