What are the factors that cause business owners to change payroll providers?
In my experience talking with small business owners about what they like about one payroll company over another varies greatly depending on their individual philosophy, experience and core values. I’ve been in a position in which I earned business, and I have been in a position where I was unable to convince the decision maker to transition away from their current payroll provider. There are tons of internal and external factors as well as risks and rewards involved when making a change to a company’s operations. Allow me to list just list a few reasons that cause organizations to switch their payroll software and talk about some payroll features business owners value. Let’s look at a few key factors that a big deal to everyone:
Price – When business owners are paying $120 payroll processing fee 26 times a year (bi-weekly payroll) when they could be paying $70 per payroll every 2 weeks, they are likely to be enticed to consider other alternative options because dollars add up. Really quick, people can calculate the math and see the value of saving a few coins, which can be reallocated elsewhere to benefit the company.
Hidden Fees – Sometimes companies are not so forthcoming with their fee structure during the initial consultation or sometimes the fine print has some details that you didn’t notice. I’ve spoken with people who were furious that they were being charged fees for processing quarterly state and/or federal tax returns. Others may not be so enthused about being charge significant delivery fees to receive tax returns and W-2’s. I’ve even seen provider charge significant fees for processing payroll the day before payday. One overlooked cost that makes one provider more expensive than another is the delivery costs for paper checks, $9 here and there adds up. Sometimes people are surprised to see additional fees on their invoices out of the blue… people often want to make a change because of it.
Customer Service – Some payroll companies have excellent customer service and other companies may not be so great. If your payroll software company relies on a call center for customer support, be wary. Sometimes it takes 15,20, 30 and event 45 minutes (worst case) to get in contact with a customer services representative. That’s not good when you need something done immediately regarding payroll amid other priorities. Running a business is stressful and I’ve seen people change providers because they can’t afford to be on hold for extended periods of time while also having to “put out fires” associated with the day to day obligations of running a business. People pay good money for service, and you expect excellent service when it is needed most. If it’s a hassle getting in touch with a human when you dial your payroll company … a change likely comes about.
Errors – I’ll say that every payroll company at some point will not have 100% fidelity. Considering the human element involved with payroll, the best of companies will make an error eventually somewhere in their client base. When mistakes are made with payroll, they typically can be corrected within 24 hours or less to minimize the inconvenience or interruption. Responsiveness is important. If you are not quick to solve a problem, likely people will go to someone who can. The frequency of errors is a big deal. If a company exhibits a pattern of mistakes and they occur often enough to irritate the accounting department, the door is wide open for a change.
Workers Comp Integration – The ability to pay your insurance through payroll software is a great perk. In the industry, we call it “pay-as-you-go.” With this pay as you go method, your insurance premiums are calculated from the total hours your employees worked per month. If your employee’s work more hours, your premium for insurance goes up. If your employee’s hours go down, then your premium goes down for that month. At the end of the year, you also don’t have to do any additional work for the insurance audit. A nice little payroll report is generated that you can send off to your insurance company to satisfy the audit. Having this ability to save money is a great perk people gravitate toward. Not having to deal with a worker’s comp audit…. Priceless.
QuickBooks Interface – QuickBooks interface occurs uniquely in our software. When payroll is run, the payroll data is automatically transmitted to QuickBooks without any additional work or time required on your part. No need to export the data into QuickBooks, it’s already there! Being able to have this feature saves on time and is an attractive element of our software. It’s something to consider when choosing a company or deciding to stay put where you are.
Handling Unemployment Claims – If you have ever had to terminate or release an employee, you have likely had to deal with unemployment claims. If the employee files a claim for unemployment benefits in your state, you must agree with the claim or disagree with the claim within a brief period once you are contacted by the state. Sometimes this can be a pain in the rear, especially when you are not familiar with the employment law, state regulations and HR protocols. Figuring out whether you should grant a claim or fight a claim can be a tough cookie, especially when you don’t have the experience or expertise. Considering the implications, your State unemployment tax rate becomes a bigger deal as the number of employees you have increased. Your SUI tax can go up or down based on how you dealt with unemployment claims in the past. To be able to hand off this task and not have to think about it is a blessing to those who have had negative experiences before. If you want help with these situations, you’ll likely want to switch to someone who has experience and expertise.
Lack of Integration – If you cannot pay your health/dental/vision insurance through your payroll software, you will have to do it on your own and that will require more of your time being spent on administrative tasks that don’t produce revenue or profit. People that value their ability to generate revenue/clients will appreciate the extra time to focus on what’s most important. If more integration means more free time, and more time means more money. When companies can save time and earn more money, someone is going to put 2 and 2 together and make some changes.
Wage Garnishment Service – Is nearly identical to the lack of integration. If an employee owes child support, the business owner who employs him or her is responsible for withholding wages from their earning and remitting them to the appropriate state agency. If the employer fails to garnish wages, it is the “Owner” who will get penalized by the state for the lack of child support payments. Oh, by the way, wage garnishments can occur because of back taxes owed to the state or federal government. The business owner is still on the hook for that as well.
Dedicated Representative/Call Center – When you call customer service do you wait for the next available representative? Or are you transferred directly to a person who is dedicated to helping your business? With a call center model, you will likely always talk to a new person with every call and the person will not have a good working knowledge of your business. With a dedicated representative you have direct communication with someone who is familiar with you and your business. Likely the person you are assigned too will have a good rapport with you well. Most people prefer a dedicated rep over a call center. If you have had issues with customer service and payroll errors, likely you will prefer working with a company who has a dedicated rep just for you because the likelihood of an error decreases when you work with people who know you on a personal level.
Check Printing/Direct Deposit – Remember how I talked about errors as a pain point earlier? Well when errors occur, how fast can they be corrected? If a payroll company can allow you to print a check on the spot in your office to fix the problem that’s awesome, right? Not every company can fix an error on the spot like that. I’ve heard of business owners having to deal with a problem on a Friday and be forced to wait until Monday to resolve the issue. Not good! If you can print a check onsite and do same day payroll, that’s great for the business owner and peace of mind for the employee. it can be used for Johnny on the spot reimbursement payments and bonuses too.
When considering a list of payroll processing companies make sure you conduct a thorough investigation into all of the above mentioned available features/perks since every company is created equal.