A man and a woman sit at a table in a restaurant or cafe, looking at each other and smiling. The man sits on the left and is typing on a laptop; he has dark hair and a beard, and he wears a white-and-light-blue polo shirt. The woman is holding an electronic tablet and has one hand to her chin; she has short, curly hair and wears a blue-green T-shirt and a gold chain necklace.
Payroll-as-a-service providers can be either full service or DIY, so you can choose how much of your payroll workflow you want outsourced. — Getty Images/Jacob Wackerhausen

Payroll-as-a-service refers to outsourcing payroll processing tasks to a company to handle all the nitty-gritty aspects of payroll, allowing you to focus on running your business. Payroll services usually offer software that automates the most time-consuming aspects of paying your team, from tracking hours and benefits to storing W-9 forms. Payroll-as-a-service could be a good investment for small business owners who spend a sizable amount of time on tasks that could easily be automated or outsourced.

What do payroll services do?

A payroll service provider falls into one of two main categories. The first is full-service providers who do everything related to payroll on your behalf, including payroll tax filing and payment, worker’s compensation, benefits, year-end reporting, and more. You simply provide the payroll service provider with basic information about your business and your employees, and they do the rest.

The second option is a more feature-by-feature, build-your-own approach. “With a DIY payroll provider, you’re required to perform some of the administrative tasks and the provider conducts the additional tasks of your choosing,” wrote People Managing People.

A DIY payroll provider is usually more affordable than a full-service option, but it does mean you’ll have to do some work yourself.

Payroll services also come in different formats. Some service providers are full-fledged companies with a team of employees to manage your account. Others are software platforms that fall more under the DIY category; you’ll have to input key information to get results. For most merchants, an online payroll-as-a-service platform is the way to go.

[Read more: Choosing the Right Online Payroll Service for Your Business]

Why should you work with a payroll service?

Payroll service providers can help you navigate the complicated IRS reporting and tax withholding requirements that apply to your business. “The number one reason business owners turn to payroll service providers is to ensure that payroll taxes are withheld properly, tax forms are filled out properly and accurately, and taxes remitted to the appropriate agency on a timely basis,” wrote The Fool.

In addition, payroll software can automate time-consuming payroll functions, such as calculating salaries and wages, generating paychecks or sending direct deposits, and allocating benefits.

It’s essential that your payroll service has top-tier security that can protect your data from potential breaches.

Chad Brooks, Business Strategy Insider Managing Editor, Business News Daily

For small businesses with no dedicated HR team, these payroll service providers can significantly alleviate the administrative burden of managing employees.

“The benefit of using a payroll service is that it saves you time, letting you focus on business operations and growth instead of crunching numbers and filing payroll taxes,” wrote Business News Daily.

[Read more: 10 Must-Have Payroll System Features for Small Businesses]

What to look for in a payroll-as-a-service partner

As you explore the options available, consider whether the payroll-as-a-service provider prices its features. Understand whether the capabilities you need are included in the base price or will cost more to add on. Find out if the payroll servicer has worked with similar companies in your industry to learn if they’re equipped to handle your needs.

In addition, check to see if the payroll solution is designed to scale with your business. Does it integrate with your existing tech? Or, does the company you want to work with have a dedicated team that will go the distance with your business?

Potentially the biggest consideration when choosing payroll-as-a-service partner is security. “Your payroll data includes all of your employees’ personal information, your business’s information and access to your business bank accounts. It’s essential that your payroll service has top-tier security that can protect your data from potential breaches,” wrote Business News Daily.

Small businesses are frequently targeted by hackers; as a result, make data security a top priority to protect your employees as you explore your options. Look for a provider that is transparent about its data security practices, issues regular updates, and has a reliable track record against data breaches.

CO— aims to bring you inspiration from leading respected experts. However, before making any business decision, you should consult a professional who can advise you based on your individual situation.

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