Connecting the Dots–questions to ask a potential payroll vendor

If you are a start-up company, or an existing concern, looking for a payroll partner, it can be quite a treacherous landscape to navigate.  The payroll industry has just a few major players, some franchise systems and many local providers.  So how does one decide which is best for THEM??

One thing NOT to do is search for “payroll” combined with your industry.  Such as “dental payroll” or “construction payroll”  for instance.  Their are very few differences to processing payroll determined by the industry except for restaurants.  They indeed have fairly unique requirements.

How to find and vet a potential payroll vendor 

  • Ask an advisor:  The single best way to find a payroll company is to ask another trusted advisor of yours such as a cpa, bookkeeper or banker.  However, I would ask them if they have any financial relationship with the company they are recommending.  In all too many cases, particularly the largest payroll providers, have a revenue sharing scheme in place which benefits the referring party.  In my opinion, putting money into the referral equation also puts in bias.  Even trusted advisors may allow the money to sway them and refer the company which pays them the best, and not take into account which payroll company may be in YOUR best interest.  The people who refer us in for instance have no financial reason to do so.  They refer us because we help them and their clients become more efficient and more economic.  Now those are good reasons to refer!!!
  • Make sure the company is insured.  Ask to see a certificate of insurance.
  • Franchise?  Find out if they actually do the work themselves, or utilize a system, to actually process your payroll and pay your taxes.   Many franchise systems don’t actually do the work, they are in essence simply a sales organization.  There is nothing particularly nefarious about this however when problems or mistakes occur, often the people you have been working with have to call someone else to resolve an issue.  Further, many payroll systems license a tax engine from the largest payroll company in the world.  The company many people are looking to get away from due to tax and customer service problems.
  • Ask for and check references!!
  • Make sure that they are a fit for you.  If you are under a few hundred employees, there’s rarely a good reason to utilize one of the large providers.  You will get lost in the shuffle.  If you are a small local company, often a company your size will work harder for you to attract and keep your business.
  • One Stop Shop, NOT:  If they try to push you to purchase additional products such as health insurance, retirement plans, workers compensation insurance, credit card processing, etc. they are unlikely a good fit.  Although it is the current  trend in payroll for payroll companies to now directly offer these types of very complex products, in our experience, the solutions provided by payroll companies in these areas typically lack sufficient design, are rife with errors, and are very expensive.
    • They will try to convince you that the one stop shop approach is beneficial. In theory, in some industries, it is.  However, ask them how many different phone numbers you would need to call if you purchased everything they recommend.  I’ve seen one major provider who has an entire page of phone numbers, over 40 of them!!
    • I’ve seen a major provider selling workers compensation insurance who categorized a companies office staff as carpenters, causing the company pay five times what they should have for their workers comp.
    • I’ve seen “retirement plans” from payroll providers which are nothing more than an IRA limiting the doctors ability to put money away to only $12,000 per year.  Further, payroll companies offering financial services rarely take on “fiduciary responsibility”.  A professional financial advisor with fiduciary responsibility will design programs which allow owners to put away a lot of money and still stay in compliance with testing rules.
  • Access:  Ask about phone systems.  We for instance don’t even use voice mail during normal business hours.  Our clients will get a live person each and every time.  You should be able to experience the same.  As a busy person with limited time to interact, it is helpful if when you call you can get something resolved immediately.
  • Dedicated Service:  do they assign one primary point of contact to you?  We do.  this allows our clients to be able to work with someone who really knows their business, and oftentimes gets to know them personally.  Similar to your dentist.  Ever notice how you always get the same hygienist?  Even though any of their hygienists could help you, they get to know you and you get to know them.  That’s a good thing in our opinion.
  • Technology:  Do they own it?  Do they lease or license it?  Theirs nothing particularly bad about this environment, but it can be helpful if your provider can actually affect change to the technology, as we can.  We created and own our technology.  So we are more easily able to make changes when necessary.
  • Timing of Change:  If you are an ongoing concern looking to change payroll companies, ask them when they would recommend you change.  If they tell you anything other than the first month of a quarter, then they are looking out for their best interests and not yours and just want to start collecting the revenue.  These mid-quarter conversions often create unnecessary tax problems for you.  Having two payroll companies paying taxes on your behalf in a single quarter is a recipe for receiving notices from the government that mistakes were made.  If they recommend that you should wait until the beginning of the next quarter to change, they are likely trustworthy partners with YOUR best interest at heart.
  • Green/Paperless:  see if they initially offer a green or paperless environment.  Although most payroll companies have these options, they often wait for you to ask.  Why?  Because they make money on the courier delivery.  We for instance always lead with green/paperless as it’s typically in the best interest of the client and can save you many hundreds of dollars each year.
  • Proposal:  What does their proposal look like?  Is it many pages of confusing language?  If so, imagine how your bill will look.  If it’s short and sweet, that’s likely a good sign that they aren’t trying to hide anything.

If you would like a free review of your current payroll situation, I would be happy to do so for you.  Payroll is an incredibly important component of any companies employee satisfaction so should be treated as such.

Call me NOW for your free review.

Mitch Zucker
ConnectPay Payroll Services
2352 Main Street, Suite 303
Concord, Ma 01742
978-450-2900 voice
978-319-4104 fax
774-218-9486 mobile

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