With dozens of payroll services out there, how can you tell which one is perfect for your organization? We explain how to judge products to help you locate the best payroll software for your requirements.
Payroll software can dramatically simplify how we run your small business. It streamlines processes, saves you valuable time and ensures the employees receive money – however only if you choose the right payroll service to your organization’s unique needs.
There are dozens (or even hundreds) of payroll link building programs made for businesses like yours, so that it makes sense if you’re unsure how to start figuring out your alternatives. Continue reading for more information on things to look for in payroll software, which features to prioritize plus more.
Think about your business’s workforce
Before you begin researching payroll software options, create a detailed listing of your company’s payroll software needs. Start with wondering these questions on your workforce:
Would you primarily employ contractors, W-2 workers or even a mix of both? Which types of employees do you anticipate having later on?
The amount of employees can you currently have? The number of are you planning to get a year later on? Couple of years? Five years?
Do the employees operate in the same state, or can you pay employees and contractors across multiple states? Should your company is currently situated in one state only, do you plan to flourish into additional states in the future?
Does one currently pay international contractors and employees or are you planning for this in the future?
Can you currently offer (or want to offer) employee benefits? Which benefits are you currently legally forced to offer locally, and are you planning to provide basic benefits or are you looking for more unique, competitive benefits like overall health perks or college savings accounts?
Do you employ seasonal workers, or does one keep up with the same workforce year-round?
The frequency of which do you plan to pay your workers? (Be sure to look at state’s payday requirements before settling on a pay schedule.)
Would you anticipate much of your employees being paid through direct deposit, or do you prefer to offer your workers an array of payment options (including paper checks, on-demand pay or prepaid atm cards)?
The way you answer these questions will help you determine which payroll software choices are worth researching.
Understand which payroll features you’ll need
Once you’ve thought carefully concerning your workforce’s needs, it’s time for it to dig into which payroll software features you can’t do without. You can find a more in depth description in the top payroll features in your comprehensive payroll guide.
Paycheck calculation
At its simplest, payroll software exists to calculate employee paychecks automatically which means you don’t need to. Most payroll software can accommodate salaried and hourly employees, but double-check that both of them are included in the payroll service you choose before you sign up.
If you have hourly employees, be sure that your payroll software either integrates after a while and attendance software or provides a built-in time tracking solution. Otherwise, you’ll need to enter employees’ hours worked personally, which wastes serious amounts of boosts the potential for introduced errors.
Paycheck calculation is about over calculating an employee’s gross pay, or perhaps the total compensation they’re permitted depending on their hours worked. Payroll software also calculates employees’ net pay, which accounts for paycheck deductions like the following:
Wage garnishment, or court-ordered paycheck deductions for debts like spousal or your sons or daughters.
Income, Medicare and Social Security taxes, which we discuss in more detail below.
Benefits deductions, like employee-paid premiums for medical health insurance.
Retirement contributions to 401(k) accounts or other retirement savings accounts.
The ideal payroll software includes payroll tax calculations with each and every plan, but wage garnishment is usually an add-on feature that costs extra. (Services including wage garnishment at no additional cost, like OnPay, are relatively uncommon.) Some payroll software, like Patriot Payroll, lets you enter benefits deductions manually but doesn’t include automatic benefits administration.
Tax service
There are two main types of payroll software: Self-service and full-service payroll. Both varieties of payroll calculate legally required payroll taxes, that include your employees’ federal income tax as well as the employee-paid portion of FICA taxes (Medicare and Social Security tax contributions).
However, self-service payroll software leaves it down for you to deduct and hold employees’ taxes, remitting them quarterly with all the correct tax forms. Full-service software directly deducts, holds and remits taxes for your benefit with the correct forms.
Some payroll software, like SurePayroll and Patriot Payroll, allow you to make a choice from self-service and full-service plans. Other providers, like Gusto and QuickBooks Payroll, offer full-service plans only.
You’ll want to pay consideration as to if your software makes other required tax deductions, including these:
State taxes, including state income tax.
Local taxes, if any.
FUTA taxes, or state unemployment taxes that employers pay based on the number of people they employ.
Most payroll software providers (though not all) look at the above tax deductions advanced features that either cost extra as an add-on service or are included simply higher-tier plans.
Direct deposit and other employee pay options
All payroll software, whether self-service or full-service, should offer automatic direct deposit as being a default employee payment option. Some payroll companies provide paper checks, on-demand payment options or prepaid debit cards. Again, many organisations treat additional pay methods as an advanced feature that amounted to an extra fee.
Third-party software integration
Many providers have built-in integrations with popular business software. For instance, probably the most popular payroll software providers all sync with top accounting software like Xero and QuickBooks Online. Others, like Wave Payroll, will connect with third-party software only through an integration app like Zapier.
Probably the most critical payroll software integrations are the following:
Some time and attendance software.
Accounting software.
HCM, HRIS or HRMS software.
Expense tracking and reimbursement software.
Advanced payroll features
Other payroll features that you might want to watch out for determined by your workforce’s needs include the following:
Tip calculation and distribution.
End-of-year W-2 and 1099 form filing.
Off-cycle payroll runs for payments like one-off bonuses.
International payroll processing.
Employee hiring and onboarding tools.
Compliance audits and updates.
Employee benefits.
HR compliance tools.
White-glove payroll software setup.
Carefully calculate payroll costs
For most businesses, paying employees is a top expense – if not their single biggest expense. Adding the price tag on payroll software in the price of employee pay can stretch your payroll budget, so ensure that you carefully consider what you might afford to dedicate to software that pays the employees.
Almost all of the most beneficial small-business payroll software systems charge both a month-to-month base fee and a per-employee fee. While base fees are a significant consideration, they aren’t as crucial to your financial allowance as the per-employee fee.
When you consider your payroll software budget, ensure that you consider not merely the amount of people you pay now so how many you wish to hire in the future. (Our payroll guide comes with a comprehensive introduction to how drastically payroll costs can vary based on the number of people you have.)
You’ll should also consider add-on fees for services like accounting software integration, international payroll, employee benefits administration, multistate tax service and time-clock software.
Finally, many payroll software companies offer multiple plan options at different price points along with another volume of features. If you’re seeking to grow your company, consider prioritizing software with multiple plans you could easily scale approximately when you hire more people. Just don’t forget to are the cause of those future price increases while charting a payroll budget
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