Obviously, the more employees you have, the bigger a task processing paychecks will be. Outsourcing payroll to an accounting office, human resource consultant, or paycheck processing company is an option for employers who do not want the extra responsibility. Small- and medium-sized employers are most likely to utilize paycheck services because they do not have the staffing or funds to operate a payroll department. Another benefit to outsourcing payroll is that it delivers a level of expertise from a third party that may be valuable to the company, especially in the area of payroll laws and taxes.

Here are a few questions to ask when interviewing payroll outsourcing companies:

• How will hours worked by the employees be transmitted to your company?

• What types of reports will I receive for each pay cycle?

• If the vendor makes a tax error, will fines and penalties be paid by the vendor?

• Is direct deposit available?

• How is paycheck accuracy verified?

• Can off-cycle payroll checks be processed quickly?

• Are quarterly and year-end payroll tax forms processed?

• Are W-2 forms mailed to the company or the employees?

Employers can outsource all or partial payroll duties. You may want to collect time data and coordinate paid sick, vacation, and holiday leaves, but have another company calculate tax withholdings, process the paychecks and ACH transactions, file tax returns, and distribute W-2 forms.