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Setting Up Payroll with a Provider: How to Transition from In-House to Outsourced


Even when you’re aware of the benefits of outsourcing—time savings, accuracy, peace of mind, etc.— inertia can make it hard to sign up with a payroll provider when you’ve traditionally managed payroll yourself. The work involved in setting up payroll with a third party can seem like a burden you just don’t have time for.

While it’s true you’ll need to put in some work up front researching prospective companies, the best providers make the transition process surprisingly simple. Here’s what you can expect when you move from managing payroll in-house to using a payroll provider for the first time.


Researching prospective providers should be the only part of the process of starting with a payroll company that requires much work on your part. Not all providers are created equal, so you’ll want to do your due diligence before trusting another company with a function as important as payroll. When evaluating providers, look for things like:

  • Payroll tax administration. Offloading the burden of paying and filing payroll taxes is probably one of the reasons you’re looking to outsource in the first place, so make sure to pick a provider that handles this.
  • Flexible payroll entry, including the ability to call-in or email hours and wages, and to do it yourself online or on a mobile app.
  • 24/7 support and the option for a dedicated specialist who is your single point of contact for payroll and tax needs.

Conversations with sales reps

While speaking with sales representatives probably isn’t one of your favorite activities, those who work for established, well-respected companies can bring a lot of value to your business. Many have a deep knowledge of payroll and can match you with a solution that best fits your needs.

Preparing the necessary information (with help)

Before you set up payroll with a payroll provider, they’ll need certain information to set up your account. To make the transition as simple as possible, your sales representative will help you gather information such as:

  • Your business’s federal employer identification number (EIN) as well as ID numbers for state withholding and state unemployment.
  • Paperwork to give your provider power of attorney to file taxes on your behalf.
  • Your business’s bank account and routing numbers.
  • Your employees’ social security numbers for W-2 preparation at year-end.
  • Year-to-date payroll summaries.

Easy and fast implementation

Hopefully, you chose a provider that handles all the work of setting up your account. If so, expect your provider to assign you an implementation specialist who will audit back to the beginning of the year, help balance your year-to-date payroll data, and even process your first few payrolls with you to ensure everything is running smoothly.

Deciding on a service model that suits you

Small business owners have different levels of comfort with technology. An experienced, well-rounded payroll provider will give you the option of working directly with your own dedicated customer service representative who can get to know you and your business. With this option, you can call your specialist and have them enter payroll for you—no computer required.

Or, if you prefer a do-it-yourself approach, you can submit payroll through your provider’s online system. Trusted payroll providers will allow you to run reports, and give your employees access to their information, check stubs, and W-2s through their solution. If you choose the online method, expect to spend a little time viewing tutorials and demos.

The benefits of outsourcing payroll far outweigh any short-term inconvenience—especially if you go with a company committed to providing new clients a smooth onboarding process. Once you’ve researched and chosen a company, worked with sales to find the right solution, submitted the necessary paperwork, and reviewed any training materials, you can start enjoying the convenience and peace of mind that comes with offloading this time-consuming function. Setting up payroll can be relatively painless, and you may even wonder why you didn’t outsource sooner.

This website contains articles posted for informational and educational value. Paychex is not responsible for information contained within any of these materials. Any opinions expressed within materials are not necessarily the opinion of, or supported by, Paychex. The information in these materials should not be considered legal or accounting advice, and it should not substitute for legal, accounting, and other professional advice where the facts and circumstances warrant.