Have you ever been on a first date and ended up playing Twenty Questions? As nerve-wracking and awkward as it can be, you have to forge through if you’re serious about getting to know someone better and decide if the relationship is worth pursuing. The same goes in your quest to find the right payroll company. You are making an important investment, so you’d better know to whom you’re entrusting your employee data and paychecks.
We compiled a list of questions to ask prospective providers that may feel a bit awkward to ask but will provide you with vital information to help you make the right choice.
You offer lots of services. Which ones are included in your base pricing, and which services are upgrades or options that cost extra?
Surprises can be a delight or a downer. Surprise charges fall into the latter. To avoid any confusion and prevent more money leaving your pocket, start by creating a checklist of all the services you need. Do your research on the plans or packages the vendor offers. Understanding what your must-have features are and what you’re willing to pay more for or sacrifice is an essential first step when considering outsourcing to a payroll provider. Keep asking questions until you are satisfied you understand what’s included and know the total price you’ll pay for any additional services you require. It’s hard to compare various vendors, however, diligence in leveling the playing field will pay off when it comes to minimizing surprises down the road.
Does your contract automatically renew at a higher rate annually? If so, what is the price increase, and when would I have to give notice if I didn’t want to renew my service?
For the convenience of customers, automatically renewing contracts are often set up right from the start, along with a base increase at the time of renewal. This helps budget, accounts for general cost increases and reduces any surprises. Before committing to a plan, double check with the provider to see if the renewal option is included in the fine print and what the cost will be this year and next. You don’t want to see a big jump after 12 months if you haven’t prepared and budgeted for it in advance. If the increase is more than 10%, that’s a big red flag that the price you’re getting up front really isn’t the true price at all; it’s just bait to lure you into a contract. Also watch out for “market rate” or fluctuating increases. The contract should specifically state the set increase, when it will go into effect, and when additional negotiations may be considered. An even better option is to go with a provider who doesn’t lock you into a contract and who you can leave at any time without penalty if the service is not meeting your needs. (Tip: Watch out for vendors that offer a low price but tie it to early termination or cancellation penalties.)
How will adding employees impact my pricing?
Even if you’re not sure of your growth plans over the coming months or years, it’s a good idea to ask about pricing as your workforce grows. Many payroll companies have fees based on the number of paychecks issued or may have pricing based on specific employee counts or ranges.
How often are internal controls audited, and do you provide the results to customers?
Handing over payroll duties to another company signifies trust. You have to be able to rely on your provider explicitly. You should know how they manage and audit their systems. At a minimum, the company should be audited annually, and information should be shared with clients upon request.
How do you keep up with payroll tax changes?
One of the primary reasons businesses outsource payroll is to move the burden of payroll tax calculations, and potential penalties and interest, off their plate. Payroll taxes are complex, determined by thousands of local, state, and federal regulations. A good provider stays current on all tax changes and continually educates staff as regulations change. Ask how they stay up to date on payroll tax changes, what training is provided for their employees, and who is responsible for updating the payroll system.
How are you protecting my employee data? Have you ever experienced a breach of data, and, if so, what happened and how did you handle it?
In a world where data breaches occur regularly, even to large corporations, you should be aware of how your employees’ data is kept safe. Protecting your employees is your business’ top priority; therefore, it should be your payroll provider's too. At a minimum, payroll companies should have:
- Proper firewall and monitoring services
- Employee education to guard against phishing schemes
- Redundancy to protect against total data loss
- Regular testing of the system to identify and correct weaknesses
Ask about SSAE18 (SOC 1) reports. These external audits by independent firms are conducted to make sure service organizations adhere to their stated procedures and processes.
Is your company bonded and insured?
The future is unpredictable. One way to ensure your organization is protected if something happens to your provider is to choose one that is bonded and insured. Reputable payroll providers will have insurance certificates they can share with prospects to alleviate worries.
Will I have an assigned account representative to help me? What are your support hours?
Payroll providers should have experienced account representatives that are assigned to work consistently with your company. Building a long-term relationship is fundamental to the success of the partnership. Of course, you might speak with someone else after hours or if your account rep is on vacation, but you should have a team of folks that helps you through onboarding, and then an assigned representative that knows and understands your business. If the company can’t assure you that you’ll have an account representative, think about whether you’ll be happy with call center support.
What will you need from me to get up and running on your system? Will I be responsible for entering historical data, or will you do that for me?
The process is a team effort; however, you are the paying customer. Talking to the vendor in advance about who’s doing what will help clear any confusion that might arise during the transition. Ask to see a list of exactly what data you’ll be responsible for and what format the data needs to be in. You’ll want to choose a provider who does most of the heavy lifting. Don’t assume that because you are paying an implementation and conversion fee that the vendor is doing most of the work involved in getting your data into the new system.
What training do you provide and is it free?
Find out what system training is available and if there are any fees associated with training sessions. Are the training sessions recorded demonstrations or live one-on-one sessions using your actual data? Are they geared to your organization or generic in scope?
May I speak with three of your current customers?
Ask for references—names and contact information of real customers you can call and speak with about their experiences with the vendor. Be as specific in your reference requests as possible. Ask for references who are about the same size as your organization and in the same industry who are using the same features you will be using. It’s always good to ask potential vendors about their average or target customer size to see how your company will fit into customer mix.
If you’re even remotely confused or unsure of the answers your prospective payroll services provider gave, ask some more awkward questions. Keep digging until you’re satisfied and ready to sign on the dotted line. That way you will end up with a provider that serves you and your company's needs, a long-term partner dedicated to your success.
Tip: For more resources to help you in your search for the right payroll vendor, visit our How to choose a payroll services page.