Maybe you already have a payroll company or you finally became large enough to need a payroll company.  There are 3 large payroll companies with a 4th coming on strong. 

I know when you only have 1-2 employees business owners don’t want to pay for a payroll company but they are worth their weight in gold.  The penalties that you will receive if you file late or pay late can be high enough to justify paying for the payroll service.  Not to mention the headache they take off your hands.

Why you need a payroll company:

• They stay on top of filing deadlines.
• They can check your tax rate changes for UI (unemployment insurance) and SDI (State disability insurance).
• They are responsible for filing your payroll tax returns on time each quarter.
• They are responsible for paying your taxes on time.
• They will file electronically which is now mandatory for All companies since 2018.

If you have a 401(k) plan, a cafeteria benefits plan or have any other type of withholding you will need one of these companies instead of the lower level payroll services offered by your bank.  If you cannot afford a payroll company yet, please use your bank so that your payroll tax returns are filed in a timely manner.

Let’s take a look at the big 4 who are: ADP, Paychex, QuickBooks and Gusto.

These 4 companies are pretty close as far as services go but there are distinctions that set one apart and sink another.  The good news is they are all large national companies that will not go out of business and steal your money. Back in the day when you could fill out a coupon and take your payroll tax check to the bank, some bookkeepers made the check out to cash and stole the money. Even though there are some good CPA firms or regional companies that may be great, I will not take the risk with my money or my clients.  I stick with the big 3 for security.

ADP and Paychex are the old men of the group. They have been around for a very long time. They both are very good companies. They have taken turns between being the arrogant large guy with bad customer service and being the runner up with great customer service.

Then along came Quickbooks. People get confused because Quickbooks actually offers 3 different types of payroll. One is a self service payroll that coordinates with your Quickbooks software. Too many companies tried this, didn’t set it up correctly and didn’t file their tax returns or tax payments on time, so it kind of got a bad name.  

Quickbooks full service payroll has the same exact features as ADP and Paychex. Quickbooks full service payroll can handle your 401(k) and cafeteria plan deductions.  They don’t offer complimentary services such workers comp and retirement plans which is a good thing. ADP and Paychex serve as brokers for these items but they aren’t particularly good at them. 

I understand that the payroll companies want to expand their services and offer a broad range of administrative products especially since payroll processing has become a commodity and sells based on price most of the time.  However, they aren’t very good at the extra services that they offer.  Workers comp especially because it can be very expensive depending upon your state.  Please comparatively shop your workers comp. But that is a separate article.

Quickbooks Full Service Payroll has some major advantages over ADP and Paychex.

1. They have excellent customer service.
2. Their service integrates with QuickBooks but does not have to.
3. They charge a flat fee each month regardless of how many times you run payroll. For companies that pay weekly, this is an incredible deal.

Gusto is the up and comer. One of my contractor clients was using this firm. They might be a darling on Wall Street but their reports section leaves a lot to be desired. Yes, they are slightly cheaper than the other companies but not worth it. The reports section of their software was very flexible but it is difficult to get the tax reports for weekly payroll that I wanted. I had to go through too many layers to get the info that I needed. The small savings in payroll fees was more than eaten up by the bookkeeping fees needed to get the info I needed. Sorry to the up and comer, but no, they aren’t there yet.

Another disadvantage is that Gusto takes the payroll taxes immediately as soon as payroll comes out. Quickbooks takes the payroll taxes out about 4-6 days after payroll is run. This may sound minor but to companies that struggle with cash flow issues this is huge.

So, hands down Quickbooks Full Service Payroll is the winner in this competition.

If it didn’t get any better, if you call them on the phone they will give you a better discount than you see advertised online.

Please feel free to leave your comments below about your experiences with the payroll companies.

Deb