Table of Contents
- What is Payroll Software?
- What are the features of Payroll Software?
- What are the types of Payroll Systems?
- How much does Payroll Software cost?
- What are the benefits of Payroll Software?
- How to choose the best Payroll Software
- Common questions to ask before choosing the best Payroll Software
What is Payroll Software?
Payroll Software automates managing employee salaries, wages, bonuses, and deductions. It also tracks time off, vacation accrual, and benefits. Payroll software typically includes features such as tax calculation, direct deposit, employee self-service portals, and integration with other HR and accounting software. It is designed to help businesses accurately and efficiently manage their payroll processes in compliance with relevant laws and regulations.
Using payroll software can help businesses save time and reduce the risk of errors in their payroll processes. It also provides employees with greater transparency and access to their payroll information, such as pay stubs and tax documents.
What are the features of Payroll Software?
- Payroll management: Track attendance, salary levels, benefits, reimbursements, leave, advances, taxes, and policies and processes for employee payroll. This feature helps the payroll department collect and verify time and attendance information (including hours worked and any paid time off). It includes calculating and distributing pay and deductions, issuing paychecks or direct deposits, and maintaining accurate records of employee earnings and deductions.
- Payroll reporting: View and track pertinent metrics to create payroll reports containing information on employee earnings, deductions, contributions to employee benefit programs, and taxes. Some payroll software systems may also offer customizable report templates and report generation, as well as scheduling automation.
- Tax compliance: Process tax-related transactions and assist in reporting and filing federal, state, and local taxes. This feature helps users remain compliant with tax obligations and avoid tax penalties. Some payroll software solutions also streamline year-end reporting and preparation of tax forms, such as W-1 (employee’s wage and tax statement) and 1099-NEC (nonemployee compensation form).
- Time tracking: Track the total time spent by employees on tasks and projects. This feature captures employee time, hourly wages, and client billing rates and uses this information to automate invoicing and payroll management functions.
- Direct deposit: Deposit payroll amounts from company accounts into individual employees' bank accounts digitally, allowing organizations to easily and securely distribute employee paychecks. Direct deposit eliminates the need for physical checks and helps reduce the risk of fraud or error.
What are the types of Payroll Systems?
- On-premise payroll software: These software solutions are installed and run on the business's servers or computers rather than being accessed and used online. This means that the business is responsible for maintaining and updating the software, as well as providing any necessary hardware and infrastructure.
- Cloud-based payroll software: These systems are accessed and used online, with all data and functionality stored in the cloud. This provides increased flexibility and accessibility, as well as reduced IT costs.
- Full-service payroll software: These systems offer a range of features and capabilities, including support for multiple pay frequencies, tax rates, and deductions, as well as integration with other business systems such as accounting or HR software. They may also offer additional services such as tax filing and compliance support.
- Online payroll software: These software companies provide the ability to manage and monitor payroll details from a secure web browser at any time, eliminating the need for additional software and equipment. With these companies, you can enter and update payroll information and track employee vacation and sick days from your computer or laptop. Many online payroll companies also offer payroll tax filing and payment in addition to basic payroll services, allowing you to focus on other aspects of your business.
- Bookkeepers and CPAs: Small to midsize businesses that do not have the internal resources to handle payroll tasks may consider outsourcing their payroll processing to an external bookkeeper or certified public accountant (CPA). It is important to choose a bookkeeper or CPA who has expertise in all the services you need and is flexible enough to handle last-minute changes to avoid processing errors. Also, keep in mind that even if you outsource your payroll process, you are ultimately responsible for the accurate deposit and payment of federal tax liabilities.
How much does Payroll Software cost?
Most products in the market are priced on a per-month basis and can be divided into three pricing tiers based on their starting price.
Price ranges:*
*The pricing included is for the entry-level/lowest-priced offering found on vendor websites on December 20, 2022. These ranges correspond to the 25th, 75th, and 100th percentiles of pricing information gathered from vendor websites of sample products.
The above list summarizes pricing for the base plans of most payroll platforms. An enterprise or premium product that is priced higher may include additional features such as project tracking, project costing and billing, and employee benefits management.
What are the benefits of Payroll Software?
- Improves tax compliance: It is common for payroll tax laws and regulations to change, which makes it challenging to calculate taxes correctly. Failing to meet deadlines may result in substantial fines and penalties for employers. A payroll system assists payroll administrators in staying compliant with current state and federal laws by providing information and reminders about compliance requirements. Some payroll software can even generate payroll summaries and tax reports automatically for tax-filing purposes.
- Increases payroll accuracy: Payroll software automates several payroll processing tasks, including calculating employee pay and deductions, generating pay stubs and reports, and tracking time and attendance. With this, payroll tools eliminate the risk of manual errors in calculation and reporting, leading to increased accuracy.
- Saves time and cost: By automating tasks and reducing the risk of errors and the need for additional staff, payroll software saves businesses time and money.
- Offers flexibility and customization: Many payroll software solutions offer a range of features and options customized to meet the specific needs of a business. This includes support for different pay frequencies, tax rates, and deductions, as well as integration with other business systems.
- Simplifies record keeping and ensures data security: Payroll software helps businesses maintain an accurate and organized record of employee pay, deductions, and other important payroll information. This makes it easier to track and report on payroll services data and helps with audit preparation. The tool protects sensitive data and financial information by storing it securely and providing access controls to authorized users.
- Furnishes employee self-service portal: Some payroll software solutions offer employee self-service portals, allowing them to view their pay stubs and request time off or make other requests online. This saves time and effort for both employees and payroll staff.
How to choose the best Payroll Software
- Make a checklist of required payroll features: Do you need support for multiple pay frequencies, tax rates, and deductions? Do you need to track time and attendance? What are the tools you want your payroll software to integrate with? Make a checklist of your requirements and look for a payroll software solution that meets your needs.
- Consider data security capabilities: Payroll software handles sensitive financial and personal information, so it's important to choose a solution that offers strong security measures. Look for features such as data encryption and secure access controls to protect your data.
- Look for employee segmentation: Employee segmentation is especially important if your business employs full-time employees and independent contractors or freelancers. Prefer investing in software that understands the difference between these employee types and allows you to process payroll and file taxes separately for each group. The software you choose should also allow you to generate custom payroll reports for different types of employees.
- Check available customer support options: Consider the level of customer support offered by the payroll software provider. Are FAQs, user guides, and video tutorials, among other helpful resources, available? Also, check if there is a dedicated support team available to answer questions and provide assistance.
- Ensure integration with your existing tech stack: An ideal small business payroll software solution should easily integrate with your existing accounting software, human resource software, or workforce management tools and migrate data automatically. Before investing in a solution, take a look at its integration options.
Common questions to ask before choosing the best Payroll Software
- Does your payroll software automatically update tax rules? Before finalizing, check if the software updates its tax-filing processes and forms per the latest tax submission and filing guidelines. An ideal tool would automate this process. It's important to choose a software system that complies with relevant regulations and laws to ensure that your payroll processes are accurate and legally compliant.
- Are there any hidden or additional costs? Even the free versions of payroll software solutions may have hidden charges, such as training and implementation costs, customization costs, add-on charges, and integration or scalability costs. To pick the best payroll software solution, make sure you have a clear understanding of the upfront and ongoing costs of the software, as well as any additional fees for extra features or priority support.
- Does the software integrate time and attendance tracking with payroll? An effective online payroll tool should be able to accurately track the hours worked by all employees and initiate payments based on that information. If a software solution does not have the capability to track time and attendance, it may result in payroll errors and tax-filing issues for your small business.
- Is there an employee self-service portal within your software? It is advisable to choose a payroll software system with an employee portal where your workforce can easily access pay stubs, tax forms, and other documents. This will make it easier for employees to access important information and file taxes. A payroll solution with an employee portal simplifies data access and streamlines tax filing for your employees.
- Is the payroll solution mobile-friendly? A mobile-friendly payroll tool allows you to handle important tasks, such as payment management and tax filing, from anywhere. An ideal payroll solution would offer a user-friendly mobile app that allows you to manage payments and tax filings from any device easily.