How to choose a payroll provider

Payroll is the one thing in an organization that can’t go wrong. Employees need to be paid correctly and on time; otherwise, they might start to look for a new job. The payroll function must therefore be in capable hands.

If the internal competence is missing, outsourcing payroll to an external service provider is the best option. To avoid problems, businesses should carefully check potential payroll services before entrusting them with their payroll. 

But how to choose a payroll provider? What qualities to look for in a payroll vendor? And what are additional factors that influence the choice of a payroll partner when setting up global payroll?

Payroll providers are, first and foremost, service providers for businesses. And as such, they should fulfill certain general requirements that are typically set out for service-providing businesses. These requirements include:

• Good customer service: Finding out what other clients say about customer service and the speed customer inquiries are processed is a good first indicator for the service level that can be expected from the provider.

• Proven expertise and good reputation: Certificates, qualifications and customer reviews are testament to the provider’s knowledge, expertise, and track record.

• Good value for money: Of course, pricing isn’t everything, but looking for a provider that offers good value for the service fee they charge is imperative.

• Ease of use: Both the pricing and the system used by the payroll vendor should be transparent. Reporting metrics should be clear and the system interface should be easy to use.

• Payroll SLAs: Service level agreements (SLAs) are common when contracting a payroll provider. They define the baseline levels of service that are expected from the arrangement. In payroll, the SLAs are usually based on payroll KPIs such as accuracy, timeliness, and efficiency.

• Level of automation: Many payroll processing tasks can be automated. Since payroll automation saves time and reduces errors in payroll, it’s an important criteria to further assess the probability with which the payroll vendor will deliver accurate payroll.

• Compliance updates: Payroll is often subject to legal changes, which is why payroll systems need to be updated on a regular basis. How often payroll providers update their system shows how serious they are about payroll compliance. 

• Service features: No two payroll vendors are the same when it comes to the range of service features they offer. Organizations should compile a list of features and services they require and then compare potential payroll partners against it. Also, do they have additional services which can be added in the future as payroll needs evolve?

In addition to the general selection criteria that apply to any kind of service provider, there are industry-specific benchmarks which are used to evaluate payroll providers. Here are some additional criteria to look out for—especially when choosing in-country payroll vendors to set up a multi-country payroll.

Reporting

As businesses expand into more and more markets, their payroll becomes more and more complex and the amount of data generated in the process becomes bigger and bigger. In order to keep track of global payroll costs, it’s vital for businesses to have access to accurate, comprehensive global payroll reporting that provides detailed insights that can inform business decisions.

Adaptability to business growth

Every business strives for growth. An organization may still be in the early stages of global expansion, with only a small remote team keeping the wheels turning in the different target markets, but employee populations in the different geographies are likely to grow in the future. That’s why it's important to choose a payroll provider who will still be able to process payroll if employee headcount increases drastically.

Data security

Payroll data is very sensitive and needs to be handled with a maximum level of protection, no matter whether payroll is processed in one or several countries. However, data security becomes even more complex when running a multi-country payroll, since data is collected in different jurisdictions and then transferred to one or several platforms for analysis and storage. Therefore, businesses should always inquire about the payroll vendor’s data protection and security standards.

Integration with other tools

Businesses that run operations in several countries often rely on software solutions which allow them to simplify the administration of their global team. As a consequence, it should be possible to integrate the provider’s payroll system with other HR and management tools. When working with multiple in-country payroll partners, organizations should consider investing in a global payroll solution that can connect the different vendor systems and provides a centralized interface for global payroll management.

Employee experience

Ease of use is a general selection criterion for service solutions, but especially in payroll, it’s not enough if the system used by the service provider is easy to handle for the HR, Accounting and Finance teams who need access to the data generated in payroll. Payroll is a vital part of the employee experience and self-service functions for employees are a great way to make improvements in this regard. Payroll providers should ideally provide an interface for employees where they can consult their payslips, update bank details, and more.

Checklist for choosing a payroll provider

Here are the most important aspects to keep in mind when selecting a payroll provider.