Assess your outsourcing needs.

You can avoid overpaying for this service if you draw up a list of precisely what you need to out source and what you don't. Beware the larger vendors, in particular, who may try to sell you too much service. "One of your best sources for advice is your accountant, who can suggest exactly what you need to out source," suggests Polisseni.

Determine what size of processor is right for you.
"Typically, a market is served by three tiers," says Jason Ladd, vice president of sales at CBS Payroll, a San Bernardino, Calif., based processor with 5,000 accounts in the western states. "At the top you have the big national players like Automatic Data Processing (ADP) and Paychex. "Then you have one or two regional players who have from 5,000 to 10,000 accounts. Then you have the lower end these are accounting firms who buy someone else's software and typically have a client list of 50 to 100 businesses."

Assess the quality of the reporting.
Many service firms are luring customers by providing customized reports that are difficult to obtain otherwise. CBS Payroll, for example, provides workers compensation reports in addition to month, year-to-date and annual payroll accounting reports. Further, it distributes wages and taxes to various departments within the client company for true costing figures. And it performs automatic debits and credits from the payroll to the ledger, eliminating part of the payroll process.

"In all, we have developed over 40 standard reports with multiple variations, based on what customers have told us they need," says Ladd. The idea of mid-sized firms like CBS is to lure customers away from the smaller competitors who cannot offer such reports, while keeping at bay the larger vendors, which may charge extra for reporting.

Get a guarantee.
Overlooking a tax filing deadline can be costly, which is yet another reason to use an outside processor. Many firms will guarantee their accuracy. Look for one that does.

Checking out the payroll processor

• Request names of current customers and call them.
• Don't buy more services than you need.
• Select the right size of processing firm.
• Assess the quality of reports.
• Insist on a guarantee of accuracy.

Get more information from these web sites.

Paychex 800/322-7292

World wide web site: www.paychex.com Click on "Managing Your Payroll" for a selection of tips about outsourcing the tasks in this area.

Automatic Data Processing (ADP) (800) 225-5237

World Wide Web site: www.adp.com Click "information center" to order free copies of "Automating the Tracking of Employee Hours" and "Changing Regulations Create Payroll Problems for U.S. Companies." Or call the information hotline: 1-800-225-5237.

Access Card offers convenience.
Employers can now offer workers check-cashing privileges more easily than ever, with a new form of debit card from Paychex, Rochester, N.Y. Employees can access their money using the Access Card at any point-of-sale terminal at no charge, or at an ATM for the usual bank fee. Employers pay a fee for each pay period.

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