Finding software can be overwhelming. Software Advice has helped thousands of businesses choose the right payroll service to help them manage payroll runs, tax filing, and compliance efficiently.

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Gusto

Gusto is a modern, online human resource platform that helps any small business owner take care of all hr tasks. Gusto offers HR tools and HR services to help with managing employee onboarding, running payroll, administrating heal... Read more

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Zenefits

Zenefits is an all-encompassing HR SaaS platform designed specifically for small to midsize businesses. The Zenefits People Platform includes a robust offering spanning HR, Benefits, Payroll, Well-being and Performance apps that c... Read more

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Dayforce HCM

Dayforce, provided by Ceridian, is a cloud-based solution for Payroll, Benefits, Workforce Management, Human Resources, Talent Management, Document Management, and Analytics. As a single application, Dayforce provides organization... Read more

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QuickBooks Payroll

QuickBooks Payroll is a technology-enabled HR services platform that offers human resource (HR) and employee management services for small businesses. Serving clients across multiple geographical regions, it helps organizations ma... Read more

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APS

APS has a mission: to make payroll and HR easier. They have been providing payroll and tax compliance services to companies since 1996. In 2004, APS released its cloud-based solution for workforce management. APS delivers a s... Read more

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UKG Pro

UKG Pro (formerly Ultimate UltiPro) is a powerful, global HCM solution. Transform your business with a truly connected global workforce experience delivered through resilient and mindful HR technology. From payroll, to talent, to ... Read more

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Namely

Namely offers a cloud-based solution for companies seeking a single comprehensive system to manage their human capital. Namely helps midsize companies manage compliance and streamline everything payroll, benefits and talent manage... Read more

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isolved

isolved is an employee experience leader, providing intuitive, people-first HCM technology. Their solutions are delivered directly or through their partner network to more than five million employees and 145,000 employers — who us... Read more

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Justworks

Justworks makes it easier to start, run, and grow a business. With Justworks, entrepreneurs and their teams get access to big-company benefits, automated payroll, compliance support, and HR tools - all in one place. Justworks... Read more

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UZIO

UZIO is a SaaS-based online marketplace that provides cloud-based HR, payroll, and benefits management software and services. It is built for businesses of all sizes. This integrated solution offers local/regional brokers, employe... Read more

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TriNet

TriNet provides a full-service solution that offers HR products tailored to the industry and strategic HR services for small to midsize businesses. With HR professionals, compliance and payroll experts, and benefit agents, TriNet ... Read more

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PeopleStrategy

A full-service broker, PeopleStrategy offers expert benefits consulting, intuitive HR software and comprehensive administrative services to provide employers with a single source for the tools and resources to attract, manage and ... Read more

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Asure HR Management

AsureHCM is a human capital management solution that brings together cloud-based technology and on-demand HR services for small to midsize businesses. The HCM platform provides businesses with payroll and tax solutions, benefits a... Read more

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Ramco HCM

Ramco Human Capital Management (HCM) is a cloud-based talent management solution that includes managed services and integrated technology modules for core human resources (HR) including personnel tracking, payroll, and benefits ad... Read more

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PlatinumHR

Execupay is a technology-enabled HR solution offering payroll, background check, and benefits management services for small to midsize businesses across many industries. Execupay's customer service team can assist HR managers with... Read more

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Sequoia

Sequoia is a comprehensive benefits management platform that uses integrated technology along with an outsourced service model to deliver one unified HR experience. With Sequoia's technology, Sequoia HRX, businesses are able to ga... Read more

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Tandem HR

Tandem HR is a Chicago-based PEO that uses HR management technology along with industry experts to deliver customizable HR solutions. Tandem HR integrated technology provides businesses the tools to manage aspects of HR processes ... Read more

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XcelHR

XcelHR is a technology-enabled HR solution that offers administrative services for managing payroll/taxes, talent acquisition, benefits, and legal compliance/risk. This solution can be used by HR leaders within small to midsized b... Read more

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Engage PEO

Engage PEO is a US-based professional employer organization that utilizes cloud technology along with the legal expertise of an HR service team to provide outsourcing solutions for small to mid-size businesses. Engage PEO provides... Read more

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Optimum

Optimum is a technology-enabled solution combining a comprehensive platform with outsourcing services for core HR functions, such as hiring/onboarding, employee training, performance management, and compliance/risk management. Thi... Read more

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Buyers guide


Last Updated: April 7, 2021

Payroll compliance is complex, especially for small and midsize businesses (SMBs). There are many things to consider:

  • Determine net pay by factoring in employee leave and time worked
  • Calculate state and federal taxes to remain in compliance
  • Ensure taxes are filed on time—the failure of which can mean facing Internal Revenue Service (IRS) fines

According to Inc.com, about 40% of SMBs incur IRS penalties, costing them an average of $850 per year. A payroll service can help you manage payroll compliance more efficiently, thereby helping you avoid these fines. The service also saves time spent with payroll processing and ensures that all your employees receive their paycheck on time.

However, because of the sheer number of payroll providers, finding the right service for your business can be confusing. That's why we've created this guide with all the necessary information you'll need for selecting the best payroll service for your business.

In this guide, we'll cover:

What is a payroll service?

Payroll services allow businesses to outsource their payroll management processes. Such services help businesses track employee time and attendance, calculate salaries, compute taxes, and remit salaries to employee bank accounts. Some services also perform tax filing on behalf of your business.

Common offerings of payroll service

The first step towards selecting the right payroll service for your business is to understand what is offered with this type of service. According to our research, the following are the features you should be aware of:

Payroll run

Calculates net pay and delivers salaries to individual employee bank accounts on the designated date.

Compliance management

Ensures that the business' payroll practices adhere to compliance standards, such as the Labor Welfare Fund (LWF), Employee State Insurance (ESI), Professional Tax (PT), and Provident Fund (PF).

Tax management

Calculates local taxes, state taxes, and federal taxes applicable to employee payroll. Some services also file taxes on behalf of your business.

Time tracking

Records employee time worked to calculate the salaries based on hourly wages. This functionality also helps payroll service providers to manage labor and overtime pay compliance.

Employee self-service

Provides your employees with an online portal or mobile app where they can access their payroll information.

W-2 and 1099 support

Generates W-2 and 1099 forms using the payroll data.

Reporting

Provides you with reports on different metrics such as employee payroll, payroll costs, and taxes.

What type of client are you?

The next step is to understand the types of clients that use payroll services. This knowledge will help you select a product based on your business requirements.

The following are different types of clients of which to be aware:

  • Integrated HR solution buyers. A lot of payroll services are offered with HR software. Using services from your HR software vendor allows you to manage HR functions (such as recruiting, onboarding, and performance management) along with the payroll process, all from a single system. If you are a small business that needs HR software that also offers payroll services, there are many options to look at in the market.
  • Standalone payroll service clients. Standalone payroll services help you automate the payroll function of your business without any additional functionality. Small businesses that have complex payroll compliance needs or are fine with keeping payroll and HR management process separate can invest in these services.

Benefits and potential issues

After you've learned about the common features, the next step is to understand the advantages of using a payroll service. Knowledge of benefits will help you assess the usefulness of a payroll service for your business, which will help you build a strong case for the investment.

Here are the key benefits of payroll services:

  • Faster payroll processing. Since payroll services manage payroll calculations and tax deductions, they are able to remit salaries faster. According to our research, most payroll services can process employee salaries in less than four days.
  • Easier compliance tracking. Payroll service providers keep a close watch on tax, payroll, and labor compliance. They ensure that the payroll taxes are accurately calculated, overtime pay is factored into payroll calculations, and employee pay and benefits are in compliance with government regulations.

  • Increased business profits. Using a payroll service helps you avoid possible costly IRS fines, thereby contributing to your business profits. Outsourcing the payroll process can also help you minimize or completely eliminate your payroll staff, resulting in reduced costs.

However, despite these benefits, there are some potential issues that you need to factor in while selecting a payroll service:

  • Data security concerns. With the use of any third-party service, there is a risk of data security. In fact, Helen Poitevin, VP Analyst HCM at Gartner, points out third-party services as one of the biggest threats surrounding employee data security. Businesses need to thoroughly examine data security practices followed by the payroll service provider before making any final decisions.
  • Loss of control. When you outsource your payroll process to a third-party service provider, you risk losing visibility and control of the payroll process. You have to rely on what the service provider tells you. For this reason, thoroughly assess the payroll management practices followed by the payroll service provider before you make the investment decision.

Market trends to understand

The landscape of payroll services is changing fast. As a result, to ensure long-term success with your payroll service provider, you need to select services that are incorporating the recent market trends into their offerings.

Here are the key market trends that you should know about for payroll services:

  • Adoption of employee self-service portals are on the rise. Employee portals allow employees to view their salary components and benefits, as well as have access to their pay slips. As businesses look for ways to automate their payroll function completely, they are more open to outsourcing employee self-service to these third-party services. We expect this feature to become a core payroll service offering in the near future.
  • Global payroll support to become standard payroll services function. As more companies expand their presence into multiple countries, an increasing number of payroll services are adding global payroll support into their offering. In addition to the features of one-country payroll services, a global payroll service also includes multicurrency and region specific compliance management.