Ask the Right Questions when Choosing Payroll Software or Services

Online services can offer even more perplexing options. Check if there are any extra per period or per employee processing costs. There may also be a fee for preparation of government required tax forms and more detailed payroll reports.

The key here is to know exactly what you need and specify it in writing. Then get the service to guarantee in writing that they can provide those services, and have them quote you a fixed cost.

If you process payroll in-house, you’ll need to purchase pay checks and advice forms, also called pay vouchers. Some programs can prepare MICR (Magnetic Ink Character Recognition)-ready check forms printed using special magnetic toner on your laser printer. Most businesses will opt for the simpler option of purchasing checks from a printer.

The least expensive check purchase option will most likely not be from the printer recommended by your bank or touted on one of those annoying little slips tucked into your software box. Software vendors and banks often receive lucrative kickbacks, umm, I mean referral fees, from recommended printers, who mark up their prices accordingly. Most commercial check printers will be able to manufacture compatible check forms, once you advise them of the packaged software you are using.

You can get away from check printing costs by using a direct deposit service. But—guess what?—that costs money too. It will often cost more to transmit a payment than the cost of a check form. However, it may still be worthwhile, considering the reduction of your in-house labor cost to print and then distribute checks. Also, many employees appreciate the convenience of an automatic deposit into their bank accounts.

If you pay a number of employees and the cost of payroll processing is important to you, don’t hesitate to ask several competing payroll processing vendors to tell you what costs you should expect to incur for a year’s usage of their system, and tell them who else you're considering. It’s a competitive business. You may get one to sharpen its pencil and redo the quote.