All businesses are tasked with the near-constant responsibility of processing payroll and managing the payroll process. While this is more easily managed by larger companies that have entire offices devoted to payroll, small businesses often find this process tedious and time-consuming. Companies also have to make sure taxes are properly withheld and benefits are dispersed according to each employee's record. Because of this, many smaller companies opt to outsource their payroll work to a payroll service company.

Payroll services can vary based on the company performing the processes and the size of the company. Anywhere from $.80 cents to $3 per check is a typical cost of these services. Although this may seem expensive, the time and resources saved by not doing payroll in-house can easily cut the overall cost of payroll in half. It frees up time to manage the other moving parts of your business, saves you the task of making sure someone is qualified to handle all the payroll management tasks.

There are a number of other reasons companies may prefer to outsource their payroll services and take on the added cost. One of the most attractive aspects is the convenience factor -- companies may it easy for you to transfer data, file for payroll checks to be dispersed, and update existing information regarding employee salaries, sick days, vacation pay and other benefits. This exchange of information has gotten even easier in recent years -- instead of mailing and phoning in information, many payroll services allow for small businesses to update payroll information over the Internet.

Payroll services also pride themselves on the accuracy of their information. Performing payroll tasks on your own can open you up to potential accounting and clerical errors. While this can happen regardless of who is processing information, payroll service companies are experienced in handling the sometimes complex calculations that go in to managing payroll. These companies also stay up-to-date on tax and payroll laws, keeping you in compliance and helping you save money when possible. This reduces the occurrence rates of accounting errors and minimizes inconveniences for your company.

Local, state and federal business regulations can complicate payroll services, particularly when you fall out of compliance with these laws and regulations. Not only can this put you on bad terms with law enforcement, it can lead to fines, legal fees and a weakened reputation among other local business owners. Even if legal issues do arise, payroll service companies are equipped with legal experts that can help your company handle a potentially complex and disastrous situation.

Payroll service cost can be a significant factor for small businesses, particularly those just starting out or operating with a small profit margin. Experts recommend that small business owners get quotes from at least three different companies before choosing a payroll service, since these companies can offer very different prices for similar services. Additionally, you should inquire with each prospective payroll service company about any additional fees that may be included with your services. For example, some may charge a company when adding or dropping an employee

You should also keep in mind that services beyond basic payroll processing can increase the cost of your payroll management. If you want to offer direct deposit and/or tax filing for your employees, the costs may increase significantly from $4 to $9. This could lead to a company of 35 employees paying as much as $1,500 a month to handle all their payroll services -- a high cost, but still cheaper than hiring a full-time payroll manager.

Payroll service costs can be negotiable, particularly when you are dealing with a smaller company competing with others for your account. If you have a preferred company but received a lower quote from a competitor, bring this up with your preferred company and see if they can match their competitor's prices. They may lower their quote to you or even match or beat their competitor's price as a result.

Some companies may prefer to have the in-house accountant handle payroll services. Although most accountants are equipped with the knowledge needed to handle these procedures, accountants are an expensive solution to your payroll needs, and many would rather not spend their time handling these tedious tasks. For both accountants and their companies, a payroll service is a more economical solution.

Companies also want to evaluate their payroll needs gradually over time, even if they currently outsource their payroll services. As businesses grow or shrink, they may find it more economical to switch to a different company offering better terms for the size of their business. Similarly, you may prefer to go out and receive price quotes from different companies and then present these better quotes to the company currently handling your payroll. Doing this can help you leverage a better price for the services you are already receiving from your company.

Small businesses can cripple themselves by avoiding payroll service costs and the benefits of outsourcing this service. Don't be fooled by the feeling that you are saving money by handling payroll on your own -- the time and resources lost often greatly outweigh the typical cost of paying an outside company to handle your payroll.