An employee's paycheck is a very important and personal item. You want to anger your staff? Mess up their payroll. But, payroll processing goes beyond just handing out paychecks to your employees. Instead, it involves filing quarterly and annual payroll taxes, state and federal reporting, and employee-benefit deductions such as 401k and health insurance. That's why it's so important that whoever processes your employee payroll does it in a consistent and accurate manner.

Despite the size of your organization, it's important to determine whether your payroll is being processed as effectively and efficiently as possible. When utilizing a payroll-service provider, be sure to consider these important aspects:

In-House vs. Outside Payroll Provider

Small-business owners often think that the only way to handle payroll is to do it in-house. Perhaps they think it's more cost effective or they're simply protective of the confidential employee information. Or, maybe they just don't know any better. Truth be told, if a firm is small with a relatively stable and unchanging staff - less than 20 employees who all work full-time - then processing payroll internally is probably a good way to go.

However, as firms grow and the dynamics of their employee population and payroll information changes, outside services become increasingly beneficial. Just like a staff payroll administrator, outside service providers can calculate payroll and tax obligations, print and deliver checks, provide management reports, and prepare quarterly and annual tax forms. Additional services you might utilize include automatic check-signing, direct deposit, year-end W-2s, and calculations for 401(k) plans.

Choosing What Works for Your Company

If you've been thinking about hiring a payroll-service provider, you need to ensure that you consider all angles. As this is a very sensitive service that requires great care and much attention to detail and customer service, it's important that you select the best service for your organization.

Here are some aspects to consider:

• Determine which services you will require, and review this list with potential vendors.
• To prevent potential paycheck emergencies, look for payroll-service providers who are local or have local representatives.
• Select a payroll-service provider who will commit to personalized service and assistance.
• Request references and, according to Payroll Finders owner, Gary Fletcher, ask them the following five questions:

1. How responsive is the provider to your questions?

2. If there was one thing you wish they did differently, what would it be?

3. Have you had any problems with accuracy?

4. Have you used another payroll service? If so, why did you switch?

5. If you had it to do over again, would you chose the same company?

The whole idea is to find the best payroll service provider for your company. Want to know what the IRS thinks? The U.S. Department of the Treasury, Internal Revenue Service has a webpage that offers a list of payroll-service providers that have passed the IRS Assurance Testing System and/or Business Acceptance Testing System requirements.

What payroll provider do you use? How has it worked out? Please share with us!