What to Look for in a Payroll Firm?

According to insurance experts, failure to pay payroll taxes is one of the most common reasons individual board members are sued. Dimitri and I have therefore always hired outside payroll expertise, and when we were still consulting, we advised our clients to do the same. Adding another party to that liability chain – someone for whom payroll is their specialty – avoids the temptation to defer making appropriate payments when money is tight… 

Unfortunately, as we are building Creating the Future, the firm with whom we have worked for almost 20 years – and with whom we have been so pleased we have repeatedly recommended them – well, they are massively disappointing us. And so, by January 1, we are intending to make a switch.

In that process, we’re seeking your wisdom – NOT about which firm you recommend, but about what to look for in such a firm. Here’s what we’ve come up with so far:

  • The capacity to indemnify us from whatever mistakes they make (whether through their own insurance or bonding or whatever)
  • Responsiveness and consistency. (In the past year, we have had 3 separate payroll specialists with our old firm. Problems have not only gone unaddressed, but the new person knows nothing about them….)
  • A track record
  • Flexibility – we are a tiny start-up, with fluctuating cash flow, which means some months we have funds for payroll on the 1st, some months it’s not till the 15th, and other months not at all. Will a firm charge us each time we make a change in our routine? (Can you tell we’ve been experiencing this?)

Now here’s where you come in: From your own experience, what else should we be considering?

  • When it comes to choosing a payroll firm, what should we be asking? What should we be looking for / paying attention to?
  • Are there danger signals to watch out for?
  • What should we expect to pay per employee?
  • Are there opportunities to collaborate – and if so, what have you seen?

If you have a firm you LOVE working with, please tell us why. What do you love about them?

And if you are pitching your own firm, please refrain from using this space to pitch your business.  Instead, please help us AND others by answering the questions I’ve posed. (And then feel free to contact us directly via this link.)

5 thoughts on “What to Look for in a Payroll Firm?”

  1. I became Treasurer of an organization that was using its credit union for payroll and general banking services- and the manager as their volunteer bookkeeper! I would NOT recommend that form of collaboration; the charity had trouble getting access to its own records (computer and paper) and I couldn’t find any proper authorizations for payroll changes. No one was doing anything wrong, except that the manager was six months behind on volunteer work. That manager had so much clout with the organization that no one wanted to touch her performance issues, and the board had no financial decision support.
    I’ll also note that under Canadian law, organizations are supposed to check out the personal privacy practices of such contractors. They should be able to provide a privacy policy and confirm some form of periodic review of privacy practices (e.g., as part of risk management).

  2. This is all really helpful, Jane. And given that one of the goals is to spread the liability, WOW it sounds like your example is the poster child for INCREASING that liability!

    I love the question about privacy policies. That one hadn’t occurred to us. Thanks!!!

  3. I have also typically advised small nonprofits to use a PEO and use one myself. I have not been wowed by what we get for our money and we are looking to take it over starting January 1. Intuit/Quicken has a program that should make it fairly painless for a small group to handle in house for far less money. I will let you know how it works out.

  4. One option may be to contract with a local, larger non-profit that has some excess capacity in their payroll department. They might be able to offer more flexibility if you need to change payroll dates, and liability issues could be addressed in the contract.

    I have also heard positive things about Quickbooks from small business owners, but have no direct experience with that. It will be interesting to hear about Mr. Carter’s experiences after 1/1/12.

  5. we like PayCycle .. recently acquired by Intuit but still a separate product.. Intuit offers what they call assisted payroll .. if you push they will come down from $85 to $45/mo + 2.50 per employee but if you have a cpa or accountant that is willing to sign on for the wholesale feature the rate is $22.50/mo +.50/employee and there is a tiny amount of effort on the employers part.. i have used paycycle for my firm for 5+ years… service is superb


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