FULL-SERVICE VS. SELF-SERVICE PAYROLL

Payroll is an important function that businesses of all sizes must manage. First, you need to decide if you want to process payroll in-house or outsource it to a specialized provider. Each option has both benefits and challenges. If you opt to outsource, you must carefully select a provider and then decide if you prefer a full-service or self-service solution. Below is basic information about full-service and self-service payroll solutions to help you choose the right option for your business.


FULL-SERVICE PAYROLL

Full-service solutions offer the ultimate hands-off option for processing payroll. Typically, business owners simply submit the hours worked by their employees and the payroll solution provider takes care of the rest. Full-service providers often assign a dedicated specialist to each client to address any payroll-related issues. Many also file and submit payroll taxes on your behalf, and some even issue W-2s to your employees each January. The pros and cons of a full-service payroll solution may vary depending on your chosen provider.

BENEFITS OF CHOOSING FULL-SERVICE PAYROLL

Full-service providers work best for business owners who want as little involvement as possible in the payroll process and may also need additional services. These solutions offer several key benefits, including:

  • A dedicated payroll specialist. As your primary contact for questions and any issues, these specialists take the time to learn about you and your business.
  • Start-to-finish payroll services. Once you submit the hours worked by your non-salaried employees and any updates on new hires or terminations, your full-service provider takes care of the rest.
  • Regular quality assurance checks. Your dedicated payroll specialist will conduct ongoing quality assurance checks to ensure the accuracy of your payroll data. This provides an extra level of protection against errors.
  • Flexibility in submitting payroll data. You may choose how to submit your payroll data—by email, fax, or phone—and may also be able to submit that data online at any time of day.
  • Access to additional services. Your payroll specialist can offer advice on other human resources and benefits administration services that may help streamline your operations or save you money.
  • Automated tax filing. Full-service providers typically file federal, state and local taxes on your behalf. This time savings often offsets the cost of using a full-service provider.

Full-service payroll providers offer diverse benefits, so be sure to ask what’s included in each offer and which services cost extra as you evaluate potential providers.

DRAWBACKS OF FULL-SERVICE PAYROLL

Despite the many benefits they offer, full-service providers also pose several challenges:  

  • Higher ongoing costs. The fees associated with engaging a full-service payroll provider may simply be too expensive for your business right now.
  • Some don’t take responsibility for errors. While many full-service payroll providers take responsibility for any payroll tax filing errors made on your behalf, some do not. That means you could be liable for any fees associated with their mistakes.
  • Additional fees. Some providers charge additional setup and account maintenance fees on top of their listed rate, which can make the full cost too much to justify.

If you’re considering a full-service payroll provider, ask a lot of questions and carefully examine your options to ensure this is the right decision for your business.

SELF-SERVICE PAYROLL

Self-service payroll solutions—sometimes referred to as “essential,” “basic,” or “enhanced,” depending on the provider—offer stripped-down payroll services that often include just issuing payments to employees and calculating taxes. You can typically add other services for an extra cost. Business owners who want a more active role in processing payroll, or who need a more budget-friendly option, often choose a self-service solution. Before choosing this option, you should first examine the pros and cons of this payroll-processing method.

BENEFITS OF CHOOSING SELF-SERVICE PAYROLL

Self-service payroll solutions offer several key benefits compared to full-service offerings, such as:

  • Lower costs. Self-service payroll solutions are less expensive than their full-service peers because they include limited services.
  • Automated form creation. Some self-service plans enable you to produce W-2s, issue payments to 1099 employees, and create the forms you need to file taxes.
  • Pay only for what you need. You can simply buy payroll processing without paying for any extra services you don’t need.
  • Greater control. With a more hands-on experience processing payroll, you have greater control of your business.

DRAWBACKS OF SELF-SERVICE PAYROLL

Although the low cost of self-service payroll solutions might seem attractive, these solutions do include some drawbacks:

  • Extra fees for certain services. Some self-service solutions do not permit you to pay 1099 contractors or charge extra for this service. In addition, some self-service solutions charge a fee each time you run payroll vs. a flat monthly or yearly payment. This means that if you make a mistake and need to re-run payroll or want to add an end-of-year bonus, you’ll face an extra fee.
  • No automated tax filing. When you engage a self-service payroll provider, you’re often responsible for filing your taxes and for any fees due to errors or late payments.
  • No dedicated payroll specialist. Without a dedicated contact assigned to your business, you’ll need to use your provider’s general helpline to address any questions or issues.

If you think a self-service payroll solution is right for your business, be sure to examine all the pros and cons of this route before making a final decision.

WRAPPING UP

Once you decide to outsource your payroll processing, you must then choose either a full-service or self-service solution. After examining the benefits, drawbacks and costs associated with each option, you can confidently choose the best option for your business.

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Recommended: To help you select a payroll service for your business, we’ve reviewed the best payroll services for small businesses.