There are plenty of reasons a company might choose to outsource their payroll services. The IRS, for example, reports that about 40% of businesses make payroll errors, and these errors end up costing these companies an average of over $800 in fines annually. Many of these errors are entirely due to managing the payroll manually, rather than as an automated service.

Outsourcing also allows employers to work on the important tasks of making business decisions and managing a company, rather than wasting hours every week crunching numbers.

While there are many advantages to outsourcing to a payroll service company, as Business News Daily points out, companies need to remember to be on the lookout for scam operations. What, exactly, is an indicator that a payroll software company is less than legitimate? Here are three things companies should look out for.

Make Sure the Company is Trustworthy

According to Michael Raanan, a former IRS officer, not all payroll processing companies are made equal. Less than legitimate companies will “take the payroll tax from their customers’ account, and then fail to turn the funds over to the IRS and other taxing authorities,” Raanan explains. “This results in tax, penalties and interest due for the business.” However, he says that small businesses can work to avoid this risk by looking for a company that is bonded, insured, and one that provides a way for the business to monitor payment delivery.

Does the Company Operate in a Timely Manner?

Donne DeGagne works with cloud-based HR services, and she says that one thing small business owners need to double-check is that, in addition to being reputable, the payroll companies they are hiring submit taxes in a timely manner. If this doesn’t happen, there can be hefty penalties to pay — and the payroll company isn’t going to be liable, the small businesses will be.

A Good Company Should Have a Corresponding Reputation

If your intended payroll company is serving dozens or hundreds of other clients, then they shouldn’t be an internet “ghost.” In other words, it should be fairly easy to Google and see what their reputation is among other small businesses. Has their collective experience been overall positive? Familiarize yourself with existing criticism before moving forward.

Do you have tips for finding legitimate payroll processing companies? Let us know in the comments. Read more articles like this.