The best payroll services offer core functionality, ample software integrations, and other key features that may or may not fit your company’s current size and payroll needs.
Important functions
These features take payroll tools one step further than manually running payroll using spreadsheets.
- Multiple payment methods: Payroll software should offer a range of ways to pay employees, whether by paper check, direct deposit or prepaid debit card.
- Payroll tax filing and payment: Payroll software and services should automatically prepare, file and pay taxes based on where employees live. This feature is especially important for companies that employ employees in multiple U.S. states and other countries.
- Unlimited salary operation: If your employees and contractors are paid on different schedules, you’ll need a payroll solution that allows unlimited payroll runs for flexibility.
- self service: One advantage of payroll software and services is that they provide an online portal for HR personnel, payroll administrators, and employees to view and sometimes change payroll-related information.
- Basic report: Payroll software runs a variety of reports on a company-wide or individual level to capture metrics such as total compensation, deductions, or taxes paid during a given quarter or tax year.
- Automatic compliance updates: Payroll software and services stay up to date on payroll and tax regulations so you don’t have to.
- Mobile access: HR staff, payroll administrators, and employees should be able to access payroll tools anytime, anywhere. In particular, employees should access their payroll history and pay stubs through mobile apps.
Software integration
The payroll software you use should integrate with QuickBooks or whatever accounting software you use so that you can accurately record your payroll history in the event of an audit. Payroll software should also integrate with benefits management software for accurate deductions and with time tracking software.
Other important considerations
To further assess your payroll needs, answer these ten questions about your business and its payroll system.
How big is my business?
Christine Stolpe, CPP, president and CEO of Wages Creek Consulting, noted that this is a key factor that small businesses must consider when choosing a payroll platform so that they don’t outgrow their system too quickly. When considering outsourced payroll, you don’t need to consider the size of your business in terms of turnover or number of clients. You only need to consider two things: How many employees do you currently have and how many more employees are you likely to add within the next one to two years?
What types of employees do I have?
You can have both regular employees and independent contractors on your payroll. Additionally, you can pay your employees a fixed monthly salary, an hourly rate, or a base salary plus commissions or tips.
Everyone’s payment structure and tax requirements are different, and you’ll need to know the numbers to evaluate your payroll needs. If you only have independent contractors, you may be able to meet your needs using an online payroll system, which is often less expensive.
How do I pay my employees?
Do you need direct deposit or process a check payment? Do you need to make international payments through platforms like Stripe and PayPal? Consider how to withdraw money from an employee’s bank account and make it as easy as possible.
How often do I pay my employees?
Do you pay all your employees at once, or do you have different schedules for different categories? For example, you might pay them weekly or biweekly. With independent contractors, you may pay them any time they invoice you.
In addition to off-cycle payments such as expense reimbursements, bonuses, commissions, etc., the payroll system should be able to handle these expenses.
Are all employees in the same location?
If your employees are located in different states or around the world, you will need to meet additional regulations. As hybrid and remote working become commonplace due to the pandemic, you have to consider whether there may be people working from different locations in the future.
Who handles payroll?
If you have a dedicated person or team to handle payroll, you may be able to manage it with a DIY payroll solution, which may be cheaper. Otherwise, you should consider investing in outsourced payroll services, even if it is more expensive. This will help ensure payments are processed accurately and on time.
What are my local/state wage laws?
Wage laws depend on the region, state, and country where the employee lives. You must know which city, state, federal or international wage laws you need to comply with. If you’re unsure, contact a payroll professional in your area to get some guidance.
How do I want payroll taxes to be handled?
As your business grows, payroll taxes can become complex and tedious. You need to decide if you want your new payroll solution to handle taxes. If the answer is yes, take a closer look at the cost calculated at the end of the year, as this often comes with an additional price tag. If you don’t, be sure to hire a reliable tax professional to handle this process for you.
What deductions do I need to plan for?
Before you pay, you’ll need to withhold tax deductions, such as income tax and Social Security taxes; wage garnishments, such as unpaid loans, alimony, and child support; and benefits, such as health insurance.
What is my budget?
Cost is an important factor when choosing a payroll company. You must have an estimate in mind of what you are willing to pay each month or year to meet your salary needs. This will help ensure you’re not overstretched when you want to pay extra for a la carte features.
