# How to Choose a Payroll Service | Capterra | Capterra > Wondering how to choose a payroll service provider? Read this guide on what to look for in a payroll service before making your decision. Source: https://www.capterra.com/resources/how-to-choose-payroll-service --- Benefits and CompensationHuman Resources # How To Choose a Payroll Service By Stephan Miller Stephan Miller Stephan Miller is a writer and software developer specializing in software and programming topics. He has written two published books and is a frequent contr... [See bio & all articles](https://www.capterra.com/resources/author/smiller/) Published February 6, 2023 7 min read Table of Contents - [Types of payroll services](#types-of-payroll-services) - [How to choose a payroll service provider](#how-to-choose-a-payroll-service-provider) - [Are you ready to hire a payroll services provider?](#are-you-ready-to-hire-a-payroll-services-provider) ## Find out what you should look for when choosing a payroll service. Every business owner is responsible for paying their team members on a regular schedule, but handling payroll internally takes a lot of time and can lead to mistakes. Even if you don't make mistakes with payroll, doing it yourself may still not be the best use of your time. The time you spend doing payroll could be spent on helping your customers and growing your business. If you are a business professional who is ready to hire a payroll provider but not quite sure how to begin, we've created this guide to help you out. What is a payroll provider? A payroll services provider is a company that helps with or takes complete responsibility for managing the payroll on behalf of other businesses. A payroll provider will calculate the wages for all employees, withhold taxes, generate payroll tax statements, cut checks, and make direct deposits as if they were part of the company's accounting team. Many modern payroll providers can do more than handle just payment delivery and taxes; they can act as a complete payroll management option. This includes tracking employee attendance, integrating and administering third-party benefits packages, monitoring workers' compensation, and providing additional human resources support for employers. ## Types of payroll services Modern payroll service providers focus on delivering trouble-free payroll processing for their clients. Many supply a variety of services. Here are some of the common services a payroll provider might offer: - **Payroll processing:** A payroll service will automatically calculate wages for each pay period and employee. Salaried employees, hourly employees, holiday pay, overtime, and more are accounted for to ensure every employee gets paid accurately and on time. - **Tax withholding and wage garnishment:** Most payroll services companies can withhold the appropriate local, state, and federal taxes, as well as social security. They also issue 1099 and W-2 forms each year for contractors and freelancers. Some even offer an error-free guarantee and will pay fines that result from mistakes. - **New hire reporting:** Federal law requires that employers report basic information on new and rehired employees within 20 days of their hire date. A payroll provider can handle this task on your behalf to ensure compliance. - **PTO management:** Many payroll providers can manage paid time off for your business with a system that tracks employees' vacation and sick days. Most of these have a built-in approval system where employees request days off, managers approve requests, and calendar invitations are sent out, so days off can be added to the appropriate work schedules. - **Payroll reporting:** Most services provide their clients with detailed reports so they have a deeper understanding of how the business is functioning. Managers, directors, and other business leaders can keep up to date on wages paid, taxes withheld, hours worked, and more. - **Integrations:** Payroll data is part of your business's overall financial data and is needed for accounting and other financial processes. Payroll services integrate with other financial and data platforms that need access to this data. - **Employee self-service:** Payroll services usually provide employees with a self-service portal. Here, employees can update their withholdings, review their pay stubs, or change their personal data without having to go through their manager or HR. ## How to choose a payroll service provider When you are looking for a payroll service provider, start with a list of what you need. Do you simply need your employees paid on time in whichever form they choose, whether by check or direct deposit? Or are you looking for more, such as a service that provides payroll processing and HR features so that all of your employee administration tasks can be managed from one location? Knowing the answers to questions like these before you start looking at provider candidates will help you narrow down your search. ### What to look for in a payroll service Not all payroll providers offer the same services or have the same workflow. Here are some things to look for when shopping for a payroll provider. **Core features**: The first step is to take the list of features you need and compare them to what payroll providers have to offer. Most providers will cut paper checks and make direct deposits, but if you need to pay your employees via prepaid debit card or some other way, make sure the provider you choose provides this option. You may also want to check if the service offers PTO administration, garnishment payments, unemployment insurance, or any other features your business may need. Also, keep in mind that many payroll service providers offer tiered plans ranging from basic to advanced packages with a full suite of features. Compare your list of payroll needs with the features of each tier to find the best match. **User experience**: Don't forget that when you hire a payroll provider, the provider will be responsible for the main reason your employees come to work. Every product and service should be designed with the user in mind. Both managers and employees should have access to the payroll information they need from anywhere, 24/7, so [being available in the cloud](https://www.capterra.com/resources/why-is-cloud-computing-important/) is a must. The dashboard or portal a payroll service provides should be easy to use and navigate from both a browser and a mobile phone and should not be cluttered with a lot of features that no one will use. **Service integration**: Payroll systems and data cannot be siloed. A company may outsource the payroll work but will still need access to the payroll data for many reasons. Some of these systems may be in-house. If you have an accounting team, they need to access payroll data from their [accounting software](https://www.capterra.com/accounting-software/) in order to get their work done. Other functions, like [HR services](https://www.capterra.com/human-resource-software/), may also need access to the data. Ensuring that your payroll service integrates with other services you use saves a lot of manual record-keeping steps and streamlines the payroll process. **Customer support options**: When something goes wrong with payroll, no one is happy. That is why it is important to research what kind of customer support a payroll service provides. Find out who you contact if the system the payroll service provides has a bug or when you have trouble adding a new hire to the system. **Compliance management**: If the payroll provider you choose offers tax services, like deducting Social Security, make sure they stay compliant with tax laws as soon as they go into effect. Also, find out if they offer penalty protection if they make a mistake. Your business may have to comply with other regulations like those mandated by the Equal Employment Opportunity Commission, Fair Labor Standards Act, or the Department of Labor. In that case, you should make sure they will provide you with the compliance data. **Reporting**: If you need payroll reporting, make sure the service provides it. For example, you may need to calculate employee overtime to determine if you need to adjust the work schedule, or your CFO may want a breakdown of your labor costs by location. If you already have in-house reporting or use [business intelligence software](https://www.capterra.com/business-intelligence-software/), you may only need to make sure you can integrate data from the payroll provider into these systems. ### Cost of a payroll service The price you pay for a payroll service varies, but most services have a similar price structure, which is a base fee per month or pay period. The per-month option gives you unlimited payroll runs a month, and the per-payroll option will cost you every time. Most services charge a processing fee per employee on top of this base fee. A base fee could be anywhere from $100, with an additional $15 processing charge per employee. Some payroll providers offer a tiered pricing structure, with each tier providing a different set of services. A basic plan may only include payroll processing and paying employees, and a step up might include paying payroll taxes. Other providers offer features as add-ons. For example, a business can get a direct deposit, HR services, or tax filing for an extra fee. ## Are you ready to hire a payroll services provider? Hiring a payroll provider can free up a lot of your time so you can focus on providing the best service for your customers and growing your business. If you are still in the process of searching, check out our list of payroll service providers, where you can filter by size, location, ratings, and more. For more information on the financial side of running a business, check out these articles: - [How to Choose the Right Accountant](https://www.capterra.com/resources/how-to-choose-an-accountant/) - [5 Best Bookkeeping Software for Small Businesses](https://www.capterra.com/resources/best-bookkeeping-software/) - [Setting Up Employee Retirement Plans for Small Business Owners](https://www.capterra.com/resources/retirement-plans-for-small-business-owners/) ## Capterra's 2026 Software Buying Trends Report ### Download our 2026 Software Buying Trends Report to see how successful software adopters avoid disappointment and how your business can, too. * * * Looking for Payroll software?Check out Capterra's list of the [best Payroll software](https://www.capterra.com/payroll-software/) solutions. ### Was this article helpful? * * * ## About the Author [### Stephan Miller](https://www.capterra.com/resources/author/smiller/) Stephan Miller is a writer and software developer specializing in software and programming topics. 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