Online Payroll Services - A Brief Introduction

Let's start this introduction to online payroll services with a definition. Online payroll services, is, simply put, the services offered by payroll companies which can be process, tracked and managed online, as opposed to manual payroll services offered by an in-house payroll or human resources department or a purely payroll software processing system.

Numerous businesses, especially the ones with small to medium-scale operations, are switching to online payroll services. This is because it is more convenient and speedier, not to mention that there is significant reduction in paperwork. All you need to is a data collection system, which the payroll services company provides through a payroll software and an internet connection.

With online payroll systems, everything starts with generating data. Companies offering online payroll services will provide you a software where you will input information such as employee's pay-rate, deductions, vacation and sick leave accruals, hours worked, total earnings, tax deductions, tax filings and raises and deductions. After that, the software automatically relays the information over the internet, transmitting it securely to the service provider's server where it is processed and backed-up at a central location.

After that, the data collected is reviewed by a payroll specialist assigned to your company, as the service provider has a roster of payroll professionals ranging from payroll assistants and clerks, to processors, to coordinators, administrators, specialists, analysts, accounts specialist, tax accountants and accountants, bookkeepers and finance managers. A paycheck will be generated and the amount credited to the employees' account via direct deposit, or sent through the mail. It all depends on the prior arrangement. Direct deposit is the more popular through. The tax filing can also be done electronically via the EFTPS or Electronic Federal Tax Payment system. Year end reports may also be generated.

With online payroll services, a brief definition is certainly not the sole information you will need. When acquiring online payroll services, there are a lot of things to consider.

  • You need to make sure about the extent of the services offered and the degree of possible customization.
  • You also would want to know if the payroll service is bonded so you can be protected from liability in the event of finance mishandling. The thing is, when discrepancies do occur, you will have to provide compensation for your employees and this can be taken care of by considering bonded payroll service.
  • Check whether the payroll service company will cover penalties. However, this can be more expensive because the payroll company needs to make sure too that everything is alright on your end. This can be avoided by providing a dedicated payroll processing computer or server. Ask about how quickly they would resolve errors and ask for feedback from previous clients about accuracy and reliability.
  • You also need to know about the average turn-around time because employees simply do not take well to delays. It is also a common habit of payroll companies to transfer the amounts from your account because they want to take advantage of floating your interest.
  • Also, make sure that the software which comes with the service is user friendly and intuitive and allows you to provide payroll related updates on a regular basis, and automatically too.
  • Lastly, consider customer service. You would be dealing with the payroll service company for as long as your business is running so it's important that you choose one which can be easily reached and who are responsive.