What Does a Payroll Service Provider Actually Do?

There’s no doubt payroll can be a headache for all businesses, no matter what size. Payroll taxes, workers’ compensation and maintaining compliance can take up a lot of time that could otherwise be used more productively. That’s where payroll service providers come in. Payroll service providers (PSPs) can take the stress out of payroll and other HR functions by providing a company with the technology and expertise to handle the tasks. Keep reading to find out more about what a PSP actually does and how they can benefit all kinds of businesses. 

What Does a PSP Do?

Just as the name suggests, a PSP specializes in payroll services that work with their clients to ensure employees are paid on time, and all legal obligations are met. They eliminate the need for an in-house HR team to handle these tasks, which often lead to errors in payroll tasks. They allow employers to focus on important tasks instead of worrying about how and when employees will get paid. There is more to a PSP than just payroll though. Many handle a wide variety of duties including: 

  • Monitoring employee time-in and time-out
  • Adjusting direct deposit accounts
  • Calculating payroll taxes and ensuring correct deductions
  • Integrate third-party 401(k) and benefits plans
  • Provide easy, electronic payroll records for employee and employer access
  • Ensure compliance with all state and federal laws 

Key Responsibilities

One of the key responsibilities of a PSP is to provide an overall easier experience when monitoring employee attendance and time at work. Most businesses do this by a punch-in or clock-in system, badges, or fingerprint scanner. Other times, employees might log into an online account to clock in or out. Some payroll companies also provide HR support services that are designed to help employers meet legal obligations and handle compliance with different labor laws. The information PSPs provide is always up to date, so businesses don’t ever have to worry about breaking compliance. 

Why is a Payroll System Necessary?

Businesses need some sort of system to track employee hours, understand deductions and issue payments. Companies that use a manual process have to manually track their hours and rates, research federal and state tax laws so the correct amount is deducted, track year-to-year date spending, and keep tabs on time-off payouts. Depending on how many employees they have, this can take up a huge chunk of time, and if you’re trying to do all this and run your business, it can be very overwhelming. 

Payroll technology can automate a lot of these processes. It provides online portals for employees to view important payment information like tax deductions, 401(k) withdrawals, and a breakdown of their benefits. More importantly, it helps employers focus on running their business rather than spending all of their time on administrative tasks. 


Choosing a PSP is a great way to streamline payroll processes and eliminates the need for an in-house payroll department. Many businesses also choose payroll services because they offer expertise in legal compliance and accountability. PSPs ensure that any pay or filing will be done efficiently and correctly, so you can focus on running your business.

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