Is your payroll service provider costing you more than you think?

Users of traditional payroll service providers (ADP and Paychex being two of the better-known examples) often literally don’t realize how much the service is costing them.

It’s common for these providers to charge on an a’ la carte basis for their services.  Which means that the only charge you’re likely to be really aware of is that big one, for the periodic payroll run.  So when you actually add up your charges for the year, you’re often taken aback to find separate, itemized charges for things such as…

  • quarterly reporting
  • check and report delivery
  • check signing
  • W-2s
  • direct deposit
  • extra pay runs
  • support phone calls (that’s right: your vendor may charge you for the time it spends fixing even problems that it created!)
    …even though many of those items are as much a part of “payroll” as the regular run itself.

Then there are a host of less tangible – but still very real – costs, such as:

  • cost of resolving an error on an employee’s paycheck caused by the payroll service provider (plus the likely cost of that same error occurring again, before the first one got fixed)
  • cost in employee goodwill/loyalty of a late delivery, requiring employees to wait for their checks
  • cost of time spent when employees question you about an old check, W-2 or vacation balance because they can’t find the information for themselves
  • time spent calling and calling your service provider to get problems resolved

This is the appeal of an Internet-based, “Software-as-a-Service” payroll service provider.  In some cases, you pay a single flat rate for access to all functions of the application, so your costs are level and very predictable.  In addition…

  • the employee/hours/rate data used for payroll runs is totally under your control, not batched in and subject to key-entry errors;
  • employees can access (authorized portions of) the same data, so they’ll rarely need your time to answer questions about old checks, W-2s or vacation time;
  • you can print checks locally (if you wish), so there’s no such thing as a check/report delivery charge (never mind a late delivery);  and
  • you can preview payroll prior to the regular run, greatly reducing the incidence of re-runs.  

We’ve looked at only the cost differences in this post;  in an earlier one, we outlined additional benefits of going with an online payroll service provider.  Hopefully, you’ll look carefully at all the dimensions before going with the provider type that’s best for you.  To make it even easier, we’ve also included a side-by-side comparison charts on our website.

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