Shawnee Love • January 17, 2020
Continuing on our theme of new technologies and practices to consider as you grow and/or strengthen your business, this blog is going to focus on payroll services. Because once you have hired a great employee (using video interviewing perhaps), you need to ensure you pay them correctly. With all the rules and regulations not to mention increasing requirements that seem to be placed on employers, having a payroll service to take care of the calculations and reporting requirements could be a major time saver not to mention offer great peace of mind.
What I can’t promise is a payroll service will save you tons of money. While they are efficient and can certainly be less expensive than an in-house payroll person or external accountant doing your payroll (for small and medium businesses in particular), I have noticed that they catch lots of errors and misses in organizations which haven’t kept up with the rules. That is, payroll services pay people accurately, and as a result, I have seen a few cases in which payroll costs increase once employers learned when overtime or stat pay applied, etc. Yes, it is what the company should have been paying their people; however, that doesn’t make it any easier to handle the increased costs. At the same time, I’d rather find out and correct a pay mistake myself than have an employee feel unfairly treated or hear from the Canada Revenue Agency or Employment Standards about errors.
Beyond the fact that you have to do some work implementing a new service provider, the challenge with outsourcing payroll to a payroll service is the payroll service providers are not created equal. Some of the issues we have experienced working with clients’ payroll service providers include:
- Lack of implementation support,
- Surprise fees or exorbitant add on costs for additional people, or standard documents like Records of Employment (ROE’s) and T4’s, etc.
- Poor response times on inquiries,
- Lack of compatibility with other accounting software,
- Surly customer service representatives who make you feel stupid, and
- Inflexibility (e.g., on timing for submitting and issuing pay, issuing ROE’s, reimbursing expenses, etc.).
That these issues occur means it is important to choose wisely. If you are contemplating using a payroll service:
- Ask for references (and call them),
- Find out what the implementation process and support and standards for customer care are in advance,
- Get a full list of costs and what is and isn’t included,
- Confirm the timelines for payroll submission, pay dates, implementation, etc.,
- Get your accounting system needs clarified for payroll uploads, and
- Meet your implementation and customer care team in advance.
Payroll services can be great assets because it is so difficult for small and medium organizations to be experts in the rules, particularly across multiple provinces and/or with multiple employee classes. At the same time, messing up people’s pay is a quick way to erode employee trust so implementing a payroll service requires great care and planning. A good service provider will guide you through the transition and ensure nothing slips through the cracks.
If you are already using a payroll service, we’d love to hear how it is going. If you aren’t, maybe 2020 is the time to consider it. A word of caution though:
Don’t choose your service provider based on how many other services they can offer (e.g., performance management, hr information system, etc.).
We issue this warning, because we haven’t yet found a payroll service that does it all well. The ones that stick to their knitting (payroll and perhaps time and attendance tracking) seem to do the best job, and when it comes to your people’s pay (and thus their trust in you), a great job is what you need.