Producing paychecks for employees is a task that no business wants to do on its own.
With the complexity of correctly calculating paycheck amounts, deducting items such as taxes or retirement contributions, and staying on top of ever-changing government requirements and filings, it's no wonder that most businesses work with payroll processing firms. Hiring an outside company to manage payroll is nothing new, but in recent years a new option has become available: lower-cost, web-based services that provide a low hassle experience ideal for small to medium sized businesses. If you’re uncertain whether an online payroll service is right for you, check out our article on 8 Reasons to Use an Online Payroll Service.

Things to consider

Assuming you have decided that an online payroll service makes sense for your business, here are some things to think about in choosing a provider. We have listed them in decreasing order of importance.

Features and functionality

The most important consideration in selecting an online payroll service is whether the product offers the features you need. Figure out the must-have features, and make sure the provider you select provides the requisite functionality. One feature we’d consider a must-have is state tax electronic filing in your state; given the hassle of writing checks and mailing forms, we’d consider a service lacking that feature to be incomplete. But that’s just us—you may feel that printing out a ready-made form and mailing in a check is not that bad; perhaps you place more value on having the easiest to use and prettiest web site. There’s no one answer for everybody, and the goal of this guide is to present information about all the services in one place, so you can make the best decision for your business. Consider both current and future needs. For example, you may not have any 1099 (non-employee) workers today, but that could easily change in the future if you decide to hire a contractor.

Here are some key features where the services differ:

• Ease of setup (note that setting up payroll is harder than actually running it)
• Overall ease of use
• Ability to electronically file state employment taxes in a particular state
• Ability to pay 1099 workers such as contractors
• Online help
• Availability of technical support
• Ability to export payroll data to various accounting software packages

Given that setting up all your payroll information in a payroll service is time consuming, it’s unrealistic to think that you will test drive multiple payroll services to decide on the one you like. However, keep in mind that all of the services reviewed by BizSnap offer a free or money-back guaranteed trial. We recommend that, during setup, you keep a careful note of all the payroll information you input into the web-based service, somewhere outside the system such as in a spreadsheet or on a notepad. That way, if you decide that the first service you sign up with doesn’t work well for you, it will be relatively quick and easy to go through the setup process the second time with a different provider.

Price

While price is always an important consideration for any small business, be sure to keep cost in perspective—getting payroll done right is important, and the difference in cost between the services reviewed by BizSnap is unlikely to be meaningful even to the smallest of businesses. Having said that, the difference in price between the services reviewed here can be quite substantial. For companies with dozens of employees, the lowest-priced option can be hundreds of dollars less per month than the most expensive option. On the flip side, if you have only five employees and don’t plan to add many, the differences in price are modest. Be mindful of the fact that saving some money on payroll processing may cost you in the long run if the service you choose lacks a feature that you need, or that would save you time and hassle.

Look and feel

Given that, for some businesses, the features and price of all the services reviewed might be completely suitable, the look and feel might become the deciding factor. You can check out screen shots on profile page for each provider: Intuit, PayCycle, and SurePayroll.

Time zone

The technical support hours offered by each service naturally follow the time zone of the corporate headquarters of each company (though the differences in hours of coverage are not that great). While not nearly an important consideration as the preceding ones, you might want to consider working with a service based closer to your time zone. PayCycle and Intuit are based in the Pacific time zone, while SurePayroll is based in the Central time zone. Again, this is an extremely minor consideration, but might be a tiebreaker if you are deadlocked between two services.