Everything you need to know about what a payroll company is, how it can help businesses streamline payroll, and what your organization can gain by strategically partnering with one.
Accurate payroll management is imperative for organizations, as even minor errors can lead to substantial fines and directly impact employees’ financial well-being. That said, running a precise payroll cycle is no small task. Businesses have to ensure exact and timely payments, navigate complicated tax regulations, and stay on top of ever-evolving employment laws in order to run a smooth, error-free payroll.
To execute a perfect payday, many organizations turn to a payroll company for help. These payroll providers offer their services and software to help businesses navigate the complexities of payroll management and ensure every employee payment is correct.
In this article, we explore what payroll companies are, how they can help businesses optimize payroll operations, and why they’re a strong investment for any-sized organization.
What is a payroll company and what do they do?
A payroll company, also sometimes called a payroll service provider, helps other businesses pay their employees accurately and on time. These companies take on various payroll responsibilities on behalf of their clients, including:
- Calculating wages
- Printing or direct depositing employee paychecks
- Tracking employee scheduling, attendance, and time off
- Integrating HR and benefits data for accurate employee withholding, deductions, and contributions
- Complying with tax requirements and filing deadlines
- Complying with local, state, and federal minimum wage, leave, and overtime policies
- Pulling custom payroll reports
Partnering with a payroll provider gives businesses a strong sense of security, assuring them that their employees will receive precise and punctual payments and that their business will meet all key tax filing deadlines and compliance obligations.
What are the benefits of hiring a payroll company?
Thinking about partnering with a payroll company? Here are a few ways a payroll provider can greatly benefit your business:
Remaining compliant
Navigating the intricate and ever-changing landscape of payroll is a tall task. Fortunately, payroll vendors generally possess extensive expertise in labor laws and regulations, enabling them to offer valuable guidance and keep your business well-informed of any updates that may impact your workforce. Helping with employee leave, aiding with employee classification, and mitigating the risk of errors and potential fines are just a few of the ways these payroll companies can help keep your organization compliant.
Looking to make compliance a stress-free experience? Learn how UKG Pro® Compliance can help any business meet compliance requirements in the US and Canada.
Easy payroll reporting
With all your payroll data in one place, your business can more easily pull detailed reports about employee earnings, overtime hours, paid-time=off usage, and more. Many payroll vendors offer out-of-the-box reporting you can pull instantly to efficiently analyze payroll data, track trends, and make informed decisions about your workforce.
Learn how Yuba County uses robust payroll reports from UKG Ready® to make informed workplace decisions.
Tax filing support
Payroll companies, like UKG’s Pro® Payment Services, can also help businesses submit reports to government agencies on your behalf. They can submit your federal, state, and local tax filings, as well as year-end reports with guaranteed accuracy and timeliness so you can avoid costly penalties for late or incorrect payments.
Mitigating errors
Manually entering information not only consumes valuable time but also introduces the risk of costly errors. Using a payroll management company that integrates with your existing HR, benefits, and time and attendance management means the latest information automatically flows directly into your payroll solution in real time. This ensures your next payroll cycle runs with only the most accurate and up-to-date information — leaving no room for manual data mistakes.
Maintaining top security
Payroll data contains sensitive personally identifiable information, so it’s crucial your business safeguards this data and protects your employees. Luckily, payroll providers can help take the onus off your company and ensure the confidentiality of this information on your behalf. Most providers strictly comply with privacy regulations like General Data Protection Regulation (GDPR) and the California Consumer Privacy Act (CCPA) to keep employee data safe and secure. Here’s UKG’s own stance on data protection.
Employee self-service
Lastly, payroll providers can help employees self-serve, saving internal HR teams the task of manually updating information and answering questions. Typically, payroll companies offer a platform or mobile application that employees can use to:
- Update personal data
- Access work schedules
- Submit time-off requests
- Verify benefits elections
- View tax documents
- Reference past paychecks
Again, due to seamless integrations with HR, benefits, and time management solutions, employee updates and elections flow directly into the payroll system, reducing manual errors and guaranteeing data precision.
Payroll solution benefits based on size of your organization
Although payroll solutions are beneficial for organizations of any size, the complexity of features needed may vary for different businesses. Here’s a closer look at the key benefits of payroll providers, based on company size:
Small businesses
Lack of in-house expertise
In smaller companies, HR professionals often juggle multiple responsibilities, spreading themselves thin. Even if your HR team possesses the necessary knowledge for payroll management, the process can still be highly time-consuming. Plus, when you factor in the time spent on learning payroll procedures, verifying employee hours and deductions, issuing paychecks, and meeting tax requirements and filing deadlines, outsourcing payroll might prove more cost-effective for your business.
Of course, partnering with a payroll company for small businesses, like UKG Ready, can give you access to intuitive tools that streamline complex payroll processes to ensure you can pay your people quickly and accurately.
Saving time
Small HR teams have a lot on their plates. Outsourcing payroll can free up their time to focus on other critical tasks, like investing in employee engagement or driving performance management. Apart from the time-saving and productivity gains for your team, partnering with a payroll company can also help your business avoid costly errors and tax penalties and give you peace of mind knowing employees will be paid on-time every pay cycle.
Mid-sized businesses
Can scale with your business as needed
More employees means more paychecks and more complexity. If your business is growing, using a payroll provider can help onboard new hires and set them up for a successful first payday, all without overburdening your HR team. When evaluating potential payroll partners, be sure to select a vendor that cannot only address your current workforce requirements, but also support your future growth. The right payroll company should be able to adapt to the evolving needs of your expanding business.
Complex tax regulations
As your company grows, you may run into more complex payroll challenges, like dealing with unions or opening new offices and hiring employees in other states. Luckily, payroll providers are armed with the knowledge to conquer any new compliance regulations and local or state laws, so your organization can focus on growing your business and relax knowing your pay practices are compliant.
Enterprise businesses
Navigating multinational payroll with ease
While some multinational businesses choose to use unique payroll providers in each of the markets they operate in, this can lead to siloed data that makes it harder to get the full picture of your organizational payroll trends. By using one single platform for your global payroll, your business can have visibility into all payroll processes, making it easier to monitor data for compliance.
From navigating tax regulations to complying with regional labor laws, an international payroll company can help protect your organization and pay your employees — all from one platform. With an accurate payroll record in one centralized location, you can have peace of mind knowing that all employee paychecks are precisely recorded and accounted for.
For more on how payroll companies can help your business meet local, national, and global compliance requirements, check out our guide, Solving the Multi-Country Payroll Puzzle.
Ensure compliance
Navigating local, state, and federal regulations is challenging enough, but addressing global laws and compliance adds another layer of complexity. If your company is thinking of opening an overseas office or already has employees in different countries, leaning on the expertise of a payroll provider can be an invaluable asset for your business.
From complying with global leave policies to properly withholding taxes to meeting local overtime and minimum wage requirements, payroll management companies can help demystify global payroll and keep your business abreast of ever-evolving international regulations and mitigate the risk of costly fines.
What are the top payroll companies
It’s difficult to name the top payroll companies as each business possesses unique needs, making certain solutions a better fit than others. Of course, there are a few key considerations to keep in mind as you evaluate potential payroll partners.
At UKG, our commitment to clients lies in three key elements: scalability and flexibility, robust integrations, and a wealth of compliance expertise. Here’s a brief look at each and how our platform can meet your business’ payroll needs:
Scalability and flexibility
UKG’s human capital management (HCM) suite can easily adapt to your organization's changing needs. Whether you're a growing startup or a global enterprise, the UKG platform can scale to meet your current and future payroll requirements. In fact, UKG helped Canadian travel company TravelBrands automate and streamline payroll processes, decreasing the company's average payroll issue resolution time by 25% in just one year.
Robust integrations
Your entire HR technology stack should work together. By choosing a unified payroll system like UKG, you can store all your people and payroll data in one system, ensuring the most up-to-date employee information and time sheets flow directly into your payroll records.
Compliance expertise
Businesses must take a proactive approach to compliance to stay ahead of rapidly evolving laws and regulations. That’s where an HCM solution like UKG can shine. UKG compliance helps organizations stay agile in the face of regulatory change by automating manual processes to reduce human errors, monitoring new labor law changes, and sharing compliance best practices.
Think UKG is the best payroll management company for your business’ needs? Check out a demo of UKG Ready for small and mid-sized businesses or UKG Pro® for enterprise companies.
What do payroll companies charge?
Payroll providers generally offer a few different pricing structures, including:
Per payroll processing
This pricing structure charges companies a set price for every payroll cycle. The total cost hinges on your company’s pay frequency (weekly, biweekly, semimonthly, or monthly) and is often a good choice for businesses with predictable and consistent payroll cycles.
Per employee
Certain payroll providers adopt a per employee per month (PEPM) cost structure. This model often permits organizations to process payroll an unlimited number of times each month, which can be a cost-effective solution for brands that run payroll more frequently. If your company ends up scheduling off-cycle payrolls for additional payments like extra compensation (commission or bonuses) or employee reimbursements, this may be the best pricing plan for your needs.
Fixed monthly fee
Finally, some providers opt for a straightforward monthly fee for their services. Providers typically charge businesses based on where their employee count falls in a range, like $75 for up to 49 employees. This fixed fee structure is commonly employed by smaller payroll service providers and can be a good fit for small businesses with stable headcount.
Additional services (if applicable)
Some companies will also charge you for one-off supplemental services for:
- Benefits set-up
- One-off reports
- Implementation
- Employee payment options
- Dedicated customer support
- Paycheck printing and mailing
- Tax filing
- W-2, 1099, and 1095 processing
Just be sure to ask a potential payroll vendor what services are included in their pricing models and which, if any, incur an additional fee.
Who is typically responsible for payroll in a company?
The responsibility for payroll can fall under either human resources or finance, depending on organizational structure and company size. Here's a breakdown:
Human resources
In many organizations, payroll is managed by the HR department. HR professionals may handle tasks ranging from employee compensation to benefits to payroll processing.
Check out our Q&A with the Experts: Experiences and Trends Within Payroll to hear how HR professionals at GPS Hospitality handle employee payroll at their company.
Finance
In other companies, the finance team might step up to own payroll. Since labor costs are often one of the largest business costs, some finance teams prefer to oversee payroll processing.
Both departments
Of course, running payroll can be a collaborative process. Many businesses choose to split the work among the two teams, with HR being responsible for employee data, compensation, time management, and benefits—and finance teams tackling financial reporting, tax compliance, and paying employees.
While this division of labor plays on the strengths of each department, it requires close teamwork and constant communication to succeed, so be sure your teams are up for the task. And remember, you can always outsource your payroll needs to a third-party provider to free up your internal teams for more strategic work, if needed.
Deliver people-focused payroll with UKG
Payroll companies play a pivotal part in ensuring the accuracy, efficiency, and compliance of their clients’ payroll processes. Not only do they streamline complex payroll operations and ensure employees are paid accurately and on-time, but payroll providers also free up internal teams’ time to focus on more strategic initiatives that drive the needle on engagement.
In today’s dynamic business landscape, payroll providers prove themselves to be an invaluable asset and a steadfast partner to any-sized business. Looking for a new payroll partner of your own? UKG Ready empowers your HR team, supports your people, and cultivates your organizational culture through modern, scalable technology coupled with payroll expertise.
