Payroll Service Bureau - Different Types of Service Bureaus

Different Types of Service Bureaus

In the United States, there are several nationwide chains for payroll processing. Then there are countless local service bureaus which vary in scope and size. Because local service bureaus tend to service only a very narrow geographic area and often see themselves as competing together against the nationwide giants rather than one another, they often band together and form alliances and trade associations whereby they share expertise and consolidate their negotiating power with their vendors.

There are specific and distinct perceived differences between having payroll processed by a national chain and a local service bureau. National chains have experience under their belts, and have a standard set of well documented processes. Local service bureaus vary in their ability to accommodate special needs, they also add a level of service that can be lost in the national arena. Local service bureaus have opportunities to at meeting specific local and national needs. This is also particularly true in regions whose needs are heavily influenced by a single industry.

In addition to the national and local service bureau options, there are also payroll service providers who can accommodate any industry versus providers who maintain a very niched or specialized focus on a single industry. The existence of single-industry payroll bureaus is dependent on the payroll complexities of the industry itself and the desire or need to handle very unique requirements. Companies should always perform their due diligence when selecting a bureau and compare both traditional providers along with those who focus on their industry.

It is common practice in the service bureau industry to purchase and resell private-labeled products and services from other vendors to enhance the service offering. Specifically, products such as time clocks, ATM "pay" cards, savings or cafeteria plans, Worker's Compensation insurance and payroll data-entry web sites, are actually the products of companies with expertise in these specific services, and are generally branded so that the customer is unaware of the third party's influence. This type of arrangement is desirable to service bureaus as it allows them to show a competitive portfolio of services that rivals that of the national chains.

Businesses may decide to outsource their payroll functions to reduce the costs involved in having payroll trained employees in-house as well as the costs of systems and software needed to process payroll. In the UK, payroll bureaus will deal with all HM Revenue & Customs enquiries and deal with employee's queries. Payroll bureaus also produce reports for the businesses' account department and payslips for the employees and can also make the payments to the employees if required. Some may decide that a smaller or local bureau can offer a more consistent and personal service than a large nationwide bureau that deals with several thousand payrolls can.

Another reason many businesses outsource is because of the ever increasing complexity of payroll legislation. Annual changes in tax codes, PAYE and National Insurance bands as well as more and more statutory payments and deductions having to go through the payroll often mean there is a lot to keep abreast of in order to maintain compliance with the current legislation.