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Apr 10, 2024 Matt Venuto

What are Managed Payroll Services (and Are They Right For Your Business?)

What are Managed Payroll Services (and Are They Right For Your Business?)

Managing your payroll used to be simple, but as your business grows, your payroll needs grow, too. If your payroll is getting too tangled to manage yourself, you’re not alone.

You’ve poured time, energy, and perseverance into building your business from the ground up. All those late nights and early mornings have paid off, and your team and business are growing.

The paperwork, compliance requirements, and tax laws are becoming an unmanageable time drain for you and your team.  It’s time to bring in some help. 

But what type of payroll management service best fits your business? 

This article explores the benefits of both in-house and outsourced managed payroll services. We also cover five crucial payroll components to consider when comparing your options.  

Managed Payroll Services 101 

Payroll is a tedious but necessary part of running a small business. What goes into small business payroll? As an employer, you have several responsibilities when it comes to managing payroll.

Some essential tasks include: 

  • Verifying timesheets
  • Calculating paychecks with deductions (like 401Ks and pre-tax insurance)
  • Making tax payments
  • Complying with local laws
  • Withholding garnishments
  • Reconciling and auditing payroll
  • Resolving issues
  • Keeping up with payroll trends

Managing payroll can be done in two ways. You can do it internally by hiring an administrator and investing in software. However, keep in mind that the quality of service may depend on the level of experience of the administrator. 

You can also outsource payroll to a managed service provider. Outsourcing payroll requires less initial investment, and providers like ConnectPay offer a dedicated onboarding team to set up your employees quickly. 

Finding the right payroll service provider can be a daunting task. You need a provider who can handle complex payroll functions effortlessly without making you feel like just another number.

At ConnectPay, our team of experienced professionals ensures you have all the necessary information and context to confidently run your payroll every cycle, even as your team grows. 

We pride ourselves on our commitment to payroll and tax compliance. Our payroll Specialists and dedicated tax team are always available to handle your business needs with precision and efficiency.

Free Payroll Tax and Compliance Review

5 Must-Have Managed Payroll Service Considerations 

Whether you run payroll in-house or use a managed payroll service provider, make sure you include each of the following components in your decision-making process to find the right managed payroll fit for your business.

1. Data security

Whether you run payroll in-house or use a managed service, data security should be a top priority in your decision-making process. A managed payroll provider must properly secure your sensitive payroll data to avoid identity theft, financial fraud, or legal issues that could result from a data breach. 

Beyond vetting the software for data security needs, be sure to interview your potential payroll provider regarding their processes for training payroll specialists. Are their payroll specialists trained to detect fraud? You can get to know more about the provider’s security awareness by asking questions or posing scenarios like: 

  • If my employee writes an email to the payroll provider requesting urgent updates to sensitive personal information or to add a new bank account, what happens? 
    • Are the payroll specialists trained to detect scenarios like cyberphishing?
    • How often are employees educated on recognizing common signs of phishing attempts or other fraudulent activities targeting payroll-related information?
  • How frequently are the provider’s payroll specialists reminded about the importance of safeguarding their own login credentials and personal information to prevent breaches?
  • What protocols are in place to investigate and respond to threats promptly in the event of suspicious activity or a potential security breach in software?
  • Can payroll specialists access their payroll information securely from remote locations? 
    • What measures are in place to secure remote access? 
    • Is 2-factor authentication available to better secure remote access?
    • Does the provider utilize a VPN for additional security?
  • What encryption methods are used to protect sensitive data transmitted between the payroll system and payroll specialists’ devices or the payroll provider's servers?

If you don’t prioritize security, it can lead to inadequately encrypted data, poor access controls, and unsafe storage that puts your business at risk. As you compare provider options, ask about their security standards, controls, and policies related to encryption, access, infrastructure, and more. Check if third-party audits or validations of their security measures are available. 

2. Customizations 

Inflexible managed payroll systems can force you into processes that lead to errors, requiring manual workarounds that are inefficient and inaccurate and will eat away at your valuable time. You need a payroll provider that can accommodate complex and unique pay policies like bonuses and reimbursements while providing flexibility to keep up with your payroll needs even as they change.

As you assess potential providers, check if they allow for granular customizations to support different pay types without extensive development costs or delays. The ability to tailor the system to your pay policies and evolve it over time as those policies change is crucial to avoiding payroll errors that can quickly become a major hassle to fix. 

3. Cost 

If you're considering managed payroll services, ask potential providers for clear and complete pricing information that includes all potential fees. This way, you can make sure that the costs are within your budget. 

Many factors can impact the price of payroll software for your small business, like how frequently you run payroll (weekly, bi-weekly, monthly, etc.) and the number of employees you have. 

Other deciding factors include: 

  • Whether your staff members live across state lines and require multi-state tax filings
  • Whether you offer free direct deposit or printed live checks (live checks generate printing and delivery fees).

Service providers need to be transparent about their pricing models and not hide costs that might become a surprise later on. As you speak with different managed payroll service providers, confirm that they offer payroll frequency and payment distribution methods that work for your business and your budget.

4. Funding Options 

It's crucial to have flexible payroll funding options to avoid disruptions in paying your staff accurately and on time. Flexibility will help you keep long-term employees and build trust among your team since they can be confident they’ll get paid on time and how it works for them. 

Review potential providers' solutions for payroll funding via accessible options like direct deposit and pay cards. Evaluate how reliably their managed payroll services and funding options can meet your payroll schedule and employee payment preferences. The right provider will offer versatile funding so you can pay staff on time regardless of hiccups. 

Related Read: Ultimate Guide: Payroll Services for Small Businesses

5. Reporting 

Accurate and timely payroll analysis offers businesses essential insights you can use to guide your compensation, policy changes, and cost management decisions through reports on costs, exceptions, liabilities, and more.

As you evaluate providers, check what types of customized reports they offer. Some popular, helpful options include:

  • Payroll Summary Report
  • Payroll Journal Report
  • Labor Allocation Report

In addition, see how easily you can pull ad hoc insights from these various reports. Gauge how their analytics and business intelligence tools meet your requirements or even offer additional visibility to improve your existing reports. 

The right provider arms you with data and dashboards to optimize decisions, catch issues early, and understand the bottom-line impact of HR and payroll scenarios. Their analysis should feel like an extension of your internal team rather than another task to manage.

Finding the Right Managed Payroll Services For Your Business 

We understand that many providers offer similar services, but we stand out by prioritizing transparency in pricing, offering tailored solutions, and providing unparalleled support.

As specialists in serving small businesses, we believe in being more than just a service provider; we're your trusted partner. Whether it's running payroll, managing tax compliance, or simply answering your questions, we're here to support you every step of the way.

Ready to streamline your payroll process? Schedule your free Payroll Tax and Compliance Review to get started. 

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Published by Matt Venuto April 10, 2024