What to Look for in a Payroll Software

What does a payroll software do for me? 

A payroll software can be an immensely time-saving tool for businesses, helping to calculate wages, generate paychecks, and ensure compliance with tax laws. By spending a little bit of time in the beginning to set it up, you’ll be able to reap the benefits of convenience with automation and accuracy in ensuring that all of your employees are paid correctly and on time.

With so many payroll softwares available offering similar features, it can be difficult to figure out which one is right for your particular business. So, in this article, we’ll be breaking down the common features of payroll software, what they mean, and what to look for to ensure that it can handle everything your business needs.

Common Features of Payroll Software

 Most payroll softwares will offer the following features:

Payroll Processing:

The central feature of payroll software is, of course, in its ability to process payroll. Specifically, it should be able to calculate wages for your designated pay period, taking into account hours worked, holiday pay, and overtime where applicable.

Tax Withholding:

A payroll software is able to automatically calculate how much local, state, and federal taxes to withhold with each paycheck. It can also help to issue 1099 and W-2 forms. A good payroll software will stay up-to-date with all the latest tax rates and regulations to ensure that come tax season, you and your employees are set.

Payroll Reporting:

For the administrators, you’ll be able to get a clear view of how the business is functioning and get access to full reports on wages paid, hours worked, and other metrics. This data can be helpful in tracking your workforce performance and financial state. 

Integrations:

Many payroll products can integrate with your accounting and financial management software, connecting data across each platform to ensure that you are always looking at the most recent and relevant data.

Employee Self-Service:

Employees have access to the software too, and are able to review their pay stubs, update their withholdings, and change any personal data. This feature is great for providing employees with transparency into their payroll without having to go through a manager or HR.

Payroll Software Costs

Here’s what to expect in costs for payroll software. 

Most providers offer a subscription model that has a flat base fee per month, then a charge for each employee that you have. 

For example, Quickbooks Payroll has a Payroll Core + Simple Start plan that is $75/month, plus an additional $6/month for each employee. So, if you have 10 employees, then this plan would cost a total of $135/month. 

As you look through different providers, be aware of potential hidden fees, like added costs to use direct deposit or complete year-end tax services. Some providers will also charge an initial set-up fee. 

If you’re a small operation looking to keep costs low, then you may want to consider using a free alternative like eSmart Paycheck. This online service provides a free payroll calculator for calculating paychecks (both for hourly and salaried employees), taking into account any bonuses, 401k contributions, and other earnings and deductions. You’ll still have to manually pay out each employee, but it can save you money if you’re willing to spend the time. 

Key Considerations

As you look through the different options available, here are some factors to consider to determine if the software is right for your business:

• Location: Which states or countries are your employees located in? If you have a distributed workforce with remote employees around the world, ensure that the provider you’re choosing is compliant in each of those locations. 

• Employee Types: What types of employees do you have (hourly, salaried, contractors, freelancers, etc.)? If you have a variety of types of employees, make sure that your provider is able to accommodate all of them. 

• Integration Capabilities: How does the payroll software fit in with your existing tech stack? If you already have a separate accounting or financial management software, you’ll want to check if it can be easily integrated so that you can seamlessly manage all your finances. 

• Processing Time: How long does it take to process a payroll? In other words, how long does it take for the money to reach your employees’ accounts? This generally takes a few days, but if you often need something that can handle a faster turnaround, then you’ll want to look for something that has expedited processing capabilities.

• Scalability: Consider how your business is expecting to grow, and how the cost of the software may increase with expected growth. If you foresee your workforce increasing dramatically over the next few years, you’ll want to ensure that the provider you choose now is able to scale with it.

Top Payroll Software Options for Small Businesses and Start Ups