Get the best payroll software for your business. Compare product reviews, pricing below. Read our buyer’s guide for more help.
Last updated on
November 12th, 2018
Payroll Software Buyer’s Guide
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 payroll reports can be a tedious, labor-intensive process, but with the right payroll software, it doesn’t have to be.
This guide provides information on the following topics:
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.
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.
Salary and wage calculation
Calculation of employee paycheck amounts based on hours worked, specified salary and wage rates, and any other contributing factors
Print employee paychecks. Batch printing can offer efficiencies versus writing individual payroll checks
Provides detailed paycheck information covering items such as hours worked, salary/wage earned, deductions, tax withholdings, etc.
Allows for custom control over withholding funds from paychecks to cover taxes, benefits, garnishments, insurance, retirement contributions, etc.
Multiple state tax tables
Support for all states varying tax rates
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 payroll returns without requiring paper-based submissions
Employee self-service 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
Allow employees to report time (either in real-time or after-the-fact) for wage calculation purposes
Allow for automatic deposit of payroll funds to employee bank accounts
Ensures 3rd party verification of wage payments and confirms that wages are in accordance with prevailing wage standards
Critical business benefits of using effective 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
Compared to a manual payroll method, the following benefits are likely to remove the most frustration caused without a payroll system in place:
Automating Tasks with Payroll Software: Payroll software can assure your business accurately withholds taxes for employees and pays mandatory fees such as Worker’s Compensation. Once the initial information is inputted into the system, payroll software can automatically calculate figures and log them in the appropriate accounts. These actions make generating payroll a much simpler and quicker process than if trying to perform these duties manually.
Minimizing Errors and Saving Time: The two biggest advantages of using payroll software are speed and accuracy. Payroll systems have been proven to save time and increase efficiency, reduce errors, and save money and resources. 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 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 payroll software into your accounting system. Without payroll software, the detailed elements involved with this task could quickly become overwhelming.
New buyers and small businesses: Small businesses 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.
Existing users desiring functions beyond core payroll: Buyers that already have a 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: 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 their 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 tool that lets employees do anything from submit time off requests, to manage 401k contributions.
Common Pain Points
Software integration issues. Most would say the biggest desire for payroll programs is the level of automation it can provide your business. However, when your payroll solution is not speaking correctly to your accounting program or your timekeeping program, manual intervention will be needed. It may require an employee having to manually transfer the data into the appropriate program, which means a lot of hours spent doing data-entry rather than focusing on other work.
Incorrectly handling payroll taxes. Payroll systems will let you automatically deduct and pay payroll taxes for your employees. These funds are submitted to the government on their behalf. Withholding an amount incorrectly can be very burdensome for not just the employee who feels they are being paid the wrong amount, but also the employer who could be dealing with this potential issues for multiple employees, all at different pay rates. Many employers will struggle appropriating the correct annual taxes when an employee is placed on leave, which can require manual adjustments, and thus be at a risk for human error.
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 effect how much tax is withheld, for example. You’ll also need to be up to date on the latest minimum wage laws and provide any periodic reporting required to the government to ensure compliance with wage laws.
The perfect payroll system for your company will be dependent on a number of factors. As previously stated above, you’ll want to ensure the solution has the features a company of your size desires, on top of being able to appropriately process payroll for the volume of employees.
Denali Payroll (pictured above) from Cougar Mountain Software is a mid-market solution capable of handling the payroll for companies with as few as 1 employee and as many as 1,000 employees.
Paymate Clarity is a comprehensively integrated payroll and human resource solution. The core module is the payroll functionality, but the solution also has optional inclusions to manage HR tasks. This includes things such as time & attendance tracking, benefits management, disciplinary tracking, vacation/sick day entitlements, and more.
Options using QuickBooks
Payroll is an available add-on for 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 $24/month plus $4/employee/month. It can also be billed annually for additional savings.
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 program to the cost of a payroll service. You’ll also need to make an educated decision on how valuable your time is, as running payroll in-house could take a staff member away from other tasks.
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 for the most popular way of paying employees, 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.