If you're still doing payroll yourself, you know that it's a painful and time-consuming process. There are so many regulations and withholding tables to keep track of, and just when you think you understand them, they change. It's a small miracle if you get everything right.

Make a mistake on payroll and your employees lose faith in you - unless you overpay them, in which case you may never find out about your error.

Adding insult to injury, if payroll's wrong or filings are late, the Internal Revenue Service will soon be knocking on your door with a penalty notice. The IRS says 40 percent of small businesses are fined for payroll errors each year, with an average fine of $845.

When you factor in the value of your time and the prospect of penalties if you make a mistake, processing payroll on your own can be a very expensive proposition. If you're feeling some payroll pain, it's time to take a serious look at outsourcing.

What's new in outsourced payroll?

Once you enter your payroll data, companies can automatically calculate, deduct, pay and file all taxes.

And there's an added bonus. Since you enter the data yourself and view the results in real time, you don't have to worry about a data entry clerk making errors when they re-enter the information. The odds of an incorrect check are substantially reduced.

To go along with web-based interfaces, you can now employ a time and attendance system to save even more time and virtually eliminate entry mistakes. The time and attendance system tracks all punch-ins and punch-outs, then automatically totals employee hours and wages. Then you simply upload the summary file to the payroll provider. No muss, no fuss.

So what can you expect from a payroll provider?

Payroll services calculate payroll and withholding obligations. They process the checks or provide direct deposits into your employees' accounts. They take care of all the government filings with federal, state, and local tax collection agencies and issue W-2s. They also will provide you with management reports that let you track and monitor your payroll.

If you determine that outsourcing payroll is an attractive alternative to in-house processing, the trick is to choose the payroll service that's right for you. First and foremost, make sure you like the way you'll be processing payroll. If you’re frequently on the road or like to do payroll whenever you choose, you may want to choose a provider that offers a Web-based service. If you prefer to give your information to a customer service rep, choose a provider that offers a call-in service.

Make sure your payroll service can address your unique needs. Most services will handle your basic needs, but if you have complex needs – say multi-state payroll, make sure the provider can handle it.

Be sure to understand all the costs up front. Occasionally, additional charges will add up to make what initially seemed to be a good price not so attractive after all. Now is a good time to buy because the online and independent providers have lower infrastructure costs and are passing on those savings to small businesses. If you choose the right provider, you’ll relieve your headaches, by saving time, money and aggravation of doing payroll yourself. You can then get back growing your business.