The Best Payroll Software

Payroll software helps you not only write paychecks but calculate and track employee salaries, wages, bonuses, tax withholding, and deductions. Payroll software applications can centralize your key payroll data and make processing paychecks much more efficient. Printing employee paychecks and creating tax reports can be a labor-intensive process, but with the right payroll software, it doesn't have to be.

This guide provides information on the following topics:

What Is Payroll Software?

Payroll software is designed to manage all elements of executing employee compensation, including wage calculation, check printing or direct deposit, and payroll tax management. Payroll software remains the key financial focus of all HR software packages, and a necessary tool for payroll departments, or more broadly, human resources.

Full service payroll software calculates and tracks employee salaries, wages, bonuses, tax withholding, and deductions. It prints employee paychecks, provides reports to better manage employee pay records, and generates complete weekly, monthly, quarterly, and annual payroll tax-related forms and reports.

Features of Payroll Software

• Salary and wage calculation: Calculation of employee paycheck amounts based on time tracking hours worked, specified salary and wage rates, and any other contributing factors
• Check printing: Print physical employee paychecks for distribution and tax filing records. Batch printing can offer efficiencies versus writing individual payroll checks
• Paystubs: Provides detailed paycheck information covering items such as hours worked, salary/wage earned, deductions, tax withholdings, etc.
• Deductions management: Allows for custom control over withholding funds from paychecks to cover taxes, benefits, garnishments, health insurance, retirement contributions, etc.
• Multiple state tax tables: Calculate varying tax rates based on individual state requirements
• Overtime management: Pay overtime at alternate pay rates or allow for the accrual of vacation time based on overtime worked
• Electronic payroll tax filing: Allow for the digital submission of direct deposit payroll returns without requiring paper-based submissions
• Employee self-service payroll portal: Allow staff to check on paycheck data such as withholding settings, vacation accrued, tax forms, as well as enact changes without additional administrative support
• Time tracking: Allow employees to report time (either in real-time or after-the-fact) for wage calculation purposes
• Direct deposit: Allow for automatic deposit of payroll funds to employee bank accounts
• Certified payroll: Ensures third party party verification of wage payments and confirms that wages are in accordance with prevailing wage standards

Benefits of Payroll Software

Critical business benefits of using effective full payroll software include:

• Reduced administrative effort, time, and cost of compensating employees through software automation features
• Increased employee satisfaction based on accurate and timely payroll delivery
• Easier observance of governmental requirements for payroll tax filing and remittance
• Improved staff retention through the execution of compensation packages that reward employee performance

The following benefits can remove the frustration caused by using an outdated, manual payroll method:

• Automate Tasks: Manual payroll systems are incredibly time consuming. Cloud-based payroll software systems have been proven to save time by automating tasks.
• Increase Accuracy and Minimize Errors: Payroll software can assure your business accurately withholds taxes for employees and pays into mandatory fees such as Worker's Compensation. Once the initial information is input into the system, payroll software can automatically calculate figures and log them in the appropriate accounts, reducing errors. Avoiding simple mistakes saves your company money and resources.
• Save Time: Automating these actions make generating payroll a much simpler and quicker process than if trying to perform these duties manually. Timely and accurate employee payment is critical to any business of any size. Late payment of withheld taxes can even result in substantial financial penalties.

What Payroll Software Does Your Business Need?

Whether your organization is a small business, a non-profit organization, or a multinational corporation, you must have an accurate and timely way to account for payroll expenses, withhold and pay government taxes, and generate the proper reports required by law. This, more often than not, means the implementation of full service payroll software into your accounting system. Without this automated software, the detailed elements involved with each task could quickly become overwhelming.

• New buyers and small businesses: Small business owners will be looking for an easy and affordable way to pay their employees. The core functionalities included in a small business payroll system will be wage calculation, check printing, and deductions management. Self-service payroll systems allow employees to contribute to their own time tracking and tax filing.
• Existing users desiring functions beyond core payroll: Buyers that already have an online payroll solution in place, but are unsatisfied with the functionality, may desire additional features to meet their growing needs. If a business has enough employees, they may move away from printing pay stubs and look for an employee self-service portal. They may also desire a way to file payroll taxes electronically, and better manage employee benefits such as overtime accumulated.
• Large companies and global enterprises: Larger employers will have more complex payroll processes. For example, companies with 500+ employees will likely need to have an entire department dedicated to processing payroll for them. New regulations such as the Affordable Care Act have made accurate record keeping more important than ever before. Many recommended options will include solutions with a heavy human resource management side to it. This could include a self service tool that lets employees do anything from submit time off & PTO requests to managing 401k contributions.

Does QuickBooks Work as a Payroll Software?

Payroll is an available add-on for Intuit's QuickBooks Desktop or QuickBooks Online. It is also available as a standalone payroll option to use alongside an alternative accounting program.

QuickBooks Payroll is one of the least expensive options on the market, starting at $36/month plus $2/employee/month. It can also be billed annually for additional savings. There is a free trial available for 30 days. Learn how you can set up Payroll with your accounting system:

Common Pain Points Solved by Payroll Software

• Software integration issues: When your accounting solution is not interacting correctly with your timekeeping program, manual intervention will be needed. It may require an employee manually transferring the data into the appropriate program, which means a lot of hours spent doing data-entry rather than focusing on other work. Payroll software can integrate with both solutions, creating a single system for handling these tasks.
• Incorrectly handling payroll taxes: Withholding an amount incorrectly on taxes can be very burdensome for employees and employers alike. Many employers struggle to calculate taxes each year, which can require manual adjustments, and are at risk of human error. Payroll systems will let you automatically deduct and cover payroll taxes for your employees. These funds are then submitted to the government on their behalf.
• Compliance risks: Businesses need to adhere to a number of local, state, and federal laws when processing payroll. These laws are affected by the number of employees and will affect how much tax is withheld. Online payroll software keeps you up-to-date on the latest minimum wage laws and provides any periodic reporting required to the government to ensure compliance with wage laws.

Payroll Software Trends

• Payroll Software vs Outsourcing Payroll. Before deciding which direction to take your business, you'll need to analyze the skill set of your workers, the risk tolerance of your business, and the costs involved. It's not as black and white as evaluating the cost of a software against the cost of a payroll service.
• Payroll is the most requested add-on to accounting software. In a survey of over 3,000 accounting software projects, it was determined that over 25% of accounting software buyers required payroll to be an included functionality.
• Cost savings come from hardware as well. Sometimes the benefits of payroll software processes go beyond the software itself. For example, a study found biometric time clocks save $298 per employee annually.
• Increase in payroll automation. In a 2016 study, 47% of employers responded that their payroll setup is automated.
• Pay cards have grown in use for paying employees. Direct deposit still commands the lead, but the number of companies (primarily in manufacturing and retail) that paid their employees via pay cards grew from 1% in 2011 to 5% in 2014.