Every company must process payroll for its employees. As a company grows, a reliable system that processes payments quickly and easily becomes critical. In order to do this, companies have two options: outsourcing to a provider, or keeping payroll in-house.
Cost and time savings are the main draw when outsourcing. A company avoids the fixed costs of a full-time salaried employee and staff can focus on their core competencies. However, by outsourcing, companies lose control over the process, and have less flexibility.
Organizations should perform a cost-benefit analysis, as when evaluating any other type of business decision. However, if once you have performed this analysis and decided that in-house is best for your company, there are many payroll solutions available to streamline the task.
But determining which solution is best for you can be overwhelming. We’ve created this guide to help you navigate the vendor landscape. Here’s what we'll cover:
This type of solution tracks a variety of information related to employee compensation and often includes benefits administration features. This includes everything related to wages (pay type and frequency, bonuses, withholdings etc.); paid vacation and time-off benefits and one-time or recurring benefits like health insurance, educational assistance, moving expenses and retirement plans.
In preparing a run, the system will calculate federal, state and local taxes (including Social Security, Medicare, unemployment and disability insurance); print checks or execute direct deposits and export data directly to accounting software or in a format that's compatible for import to an accounting system. It should also support reimbursements for mileage and other travel expenses, as well as any other expenditures fronted by employees.
Finally, the software should prepare tax forms and reports for the employer, employees and contractors, such as the 940, 941, 944, 1099, W2, W3 and 1099-MISC.
If your company is tracking employee information and processing payments manually, payroll solutions could save you time, money and a lot of headaches by mitigating compliance risks.
Save time. The biggest and most obvious benefit of a payroll management system is that it saves time, which, in turn, saves money. These solutions are designed to be highly intuitive, so the learning curve to set up and operate basic paycheck software is very low.
These time savings add up. For instance, when the manufacturing firm Renaissance Veneer Specialty Products, Inc. implemented ADP's solution after having run payroll manually for years, the company’s HR manager said, “What used to take two days now takes...about half a morning.”
(Source: IRIS Software and Services)
Increase accuracy and decrease risk. Additionally, these systems help companies ensure they remit the correct amount of paycheck-related taxes and file applicable reports on time. When running payroll manually, even an honest mistake, such as a multiplication or rounding error, can have significant effects. In fact, in a 2012 study, ADP found that one-third of mid-sized companies incur penalties for noncompliance. These solutions will complete tax filings and reports for you, and remind you when they’re due.
And simply keeping up with the changes to the tax code is a daunting task. These systems track these changes so you don’t have to.
Generate reports. Finally, paycheck processing solutions allow you to track information over time and quickly produce useful reports for internal decision makers, accountants and auditors. Examples include summaries of quarterly costs, annual tax remittances and historical employee participation in 401k programs.
Vendors such as NuView HR include comprehensive payroll reporting functionality
For many companies, payroll is just one component of their software needs, but not always. There are several different levels of buyers, and these categories will help you determine the software that will best fit your needs:
|These types of buyers...||Should evaluate these sytems...|
|Small businesses||Smaller companies simply looking to streamline their process will want a solution dedicated 100 percent to payroll, but at a very affordable price point. Example vendors: Triton HR, ADP.|
|Mid-sized businesses||Human resources professionals at medium-sized companies or larger (50+ employees) will benefit from more than just basic payroll functions. At this level, recruitment, workforce management and other features like scheduling and attendance tracking become more valuable, and for that the buyer will want a more comprehensive human resources management system. Example vendors: Ascentis, ADP, Kronos, NuViewHR, Vista HRMS.|
|Large businesses||These buyers are looking to expand beyond the human resources department into an enterprise resource planning (ERP) package that incorporates payroll processing. This will ensure tight integration between payroll and other HR functions, as well as accounting and other department-specific systems. Example vendors: Epicor HR, Sage, Omniprise HRM, Lawson HR.|
More payroll software is now Web-based. Software-as-a-Service (SaaS)—a deployment model where the vendor hosts the software on its own servers and clients access the solution through their Web browser—is becoming more prevalent for payroll applications. Because tax laws change frequently, any software you buy will need to be updated at least annually. Online systems provide an excellent answer to that concern, as vendors automatically update the software with changes to tax laws for you.
Employee portals are becoming more popular. Across the board, HR software is becoming more employee-centric. The availability of employee portals, on both SaaS and on-premise solutions, is growing. Look for more functionality that’s targeted toward employees; for example, access to personal pay history, personal benefits, bank account details, attendance and timesheet data and absence planning and reporting.
We're able to offer this service to buyers for free, because software vendors pay us on a "pay-per-lead" basis. Buyers get great advice. Sellers get great referrals.