Many businesses arrive at the strategic decision to outsource payroll, with several benefits to be gained by this professional arrangement. There are a number of providers out there, from payroll software to professional payroll services, so it is critical that you ask the right questions to hone your choice. 

Here are some questions to ask your shortlisted payroll providers, and be sure to have an understanding of what your optimal scenario would be so that you can assess suitability.

What kind of services does this third-party provider provide?

Not all professional payroll services are made equal, and the scope of a payroll provider can be set by the business. Establish what your exact needs are and ensure that your chosen provider will accommodate each of these functions. 

For example, will your outsourced payroll provider simply processes payments, or will they also enter new employees into the system and process those more complex payments? Furthermore, are you expecting this payroll provider to take on some of the roles more traditionally carried out by the Human Resources department? Understand the capacity of your outsource payroll provider and what exactly you need.

How responsive can I expect you to be to my employees?

Businesses who are exploring outsourced payroll will often query what sort of support they can expect when signing on. Employees have all kinds of questions about their salary, benefit balances and other payroll related issues. Be sure to ask your payroll provider how responsive they will be to these queries, and what the most appropriate communication channel should be.

Employees who are accustomed to making their way to the Finance department to clarify these sorts of questions will feel supported to know that these questions and peace of mind and also be afforded through a third-party provider. Typically, there will be service levels that you can choose from, so be clear on what these services are and what responsiveness you can expect for each.

Who manages payroll compliance?

Your outsourced payroll provider should be educated in state and federal legislation and tax payment compliance. This is why a qualified and trusted payroll provider is the only option that should be considered. Discuss how they enforce these compliances and what framework is in place to ensure on-time payment for your employees. 

Tax compliance is a core reason why businesses consider outsourcing, especially if an office manager or other employee is taking on this role and does not have the time or acumen to keep abreast of new laws. Additionally, you want to be clear on what payroll software is going to be used, as this has a part to play in compliance since the introduction of Single Touch Payroll. You might also find that cloud payroll is an ideal platform that will give your management greater visibility. 

How is time attendance recorded, and will payroll be integrated with other software?

Some workplaces have time attendance software to track the hours worked by casuals, and even full-time employees. In many cases, this software is linked to payroll software so that management can approve timesheets easily and assess what hours have and have not been worked. If your business has a large casual workforce, then this question is going to have a greater weight. 

If time attendance software cannot be integrated with your chosen outsourced payroll provider, then you have to manually complete this function, which might add pressure to your management and an already-busy week. You may also have a preference in the kind of rostering software you wish to use, so also explore what that looks like with your outsourced payroll provider.

What success have you achieved with other clients similar to my business?

It’s always beneficial to have a deeper understanding of the value that can be delivered to your unique business. Beyond compliance and reporting functionality, seek to understand what your potential payroll provider has achieved with similar business types. Perhaps they have allowed business owners to have greater autonomy, saved on finance employee headcounts, or even eliminated any backpay and discrepancies for businesses that have been unable to keep up with award rate changes.

This question might just bring you closer to choosing a payroll provider that is going to deliver exactly what you are after and even bring more benefits than you had not anticipated.


Check-in with your employees and management to see if there are any other questions that should be asked of a potential payroll provider so that everyone’s preferences and needs are catered to. 

If you would like to hear more about the processes and procedures of our team of professional payroll team – contact i3Group today!

Check out our master guide with further resources about payroll outsourcing here!