How to Choose the Best Payroll Processor for your Church
Managing payroll for your church can be a complex task, and it's important to choose the right payroll processor to ensure that your church is in compliance with tax laws and regulations. As you have already heard me say, not everyone who does payroll knows how to properly process church payroll. It is a specialized area of payroll and you need to choose wisely before trusting such an important aspect of your churches finances and tax compliance to another company. I’m going to give you 6 checkmarks you need to have before selecting your payroll processor to ensure that you are getting the best service for your church. Here are some of the key things to look for.
1. Experience: Look for a payroll processor that has experience working with churches. Please. As a church, you have unique payroll needs that require specialized knowledge and expertise. Do NOT take their word that they understand churches or that they “have many church clients”. I say… prove it. Ask for references. If they say they can’t do that --- move on. When a potential client reaches out to us for outsourced bookkeeping and/or payroll services, we have a list of churches who have already given us permission to use them as a reference. Once reference information is given to a prospect, I contact the client and let them know who will be contacting them and why. I have never had an issue with this. I believe that it’s good business and helps build credibility.
2. Compliance: Make sure that the payroll processor is up-to-date on all of the latest tax laws and regulations. If there has been a recent tax law change that affects church or minister payroll, inquire to see if the processor is aware of that change. Absolutely inquire about their understanding of Housing Allowance. Ask how they can assure you that all required tax deposits and filings will be made on time. This will help ensure that your church stays in compliance and avoids any penalties or fines.
3. Customer service: Choose a payroll processor that provides excellent customer service. You want to work with a company that is responsive, helpful, and easy to work with. One of my MAJOR pet peeves when trying to reach a company that I am paying any type of service for is when I cannot find a live, breathing human-being to speak to. I absolutely detest computers answering the phone. And only being able to communicate via email is not on my “make me happy list” either. With all of the technological advances that have been made, NOTHING beats having a real person (who clearly speaks and understands the same language I do and who actually KNOWS how to resolve the issue I’m calling about) to help you with an issue. Taking a 15-minute phone call to resolve an issue is a gazillion times better than yelling at a computer that could seriously care less about how frustrated I am because speaking into the phone or pushing the buttons are getting me nowhere or having to wait 24-48 hours for a customer service specialist to respond to your email. Those things may not irritate you or raise your blood pressure like they do me, but knowing in advance how you can communicate with the service is helpful.
4 Security: Look for a payroll processor that takes security seriously. They should use industry-standard security measures to protect your church's sensitive financial information. They should offer a bank-secure encrypted portal for exchanging information that contains sensitive company and employee data. NEVER send sensitive data via email.
5. Flexibility: Choose a payroll processor that can customize their services to meet the specific needs of your church. This may include providing specialized reports or handling unique payroll situations such as Housing Allowance, any ministers who may have filed Form 4361 and other employee benefits your church may offer.
6. Price: Finally, consider the price of the service. Make sure that the payroll processor's fees are reasonable and competitive with other providers in the market. Again, you get what you pay for. I have recently been contacted by two churches who were utilizing outsourced payroll services and found out it was not the right fit for them. One church used a CPA firm that was local to them and when they mentioned wanting to add Housing Allowance to the minister’s payroll, the CPA firm had no idea what that meant. The next church used a national payroll service that advertises as processing church payroll only at a fair price, and the church has received late filing notices three times in the last year due to failure of the company to file their payroll taxes on a timely basis. Both of these outsourced companies were charging less than $60/month for their services. I will repeat…. You get what you pay for. If you’re shopping for price only… don’t expect excellence because anyone who knows their job well, knows the value of the services they provide and once you become a client, you will find that paying a little higher rate for that compliance, is actually cheaper than what non-compliance will cost you when the notices start coming.
I hope that the information provided was informative and helpful to you. I pray that it gives you a good checklist to go by if you are in the market for an outsourced payroll processor.
Be sure to tune in my podcast Bookkeeping with a Purpose for more valuable insights for your church finance office.
Until next time....