If you work for a small business, you’ve probably tried processing payroll manually. At first, it may seem simple—but small-business owners quickly find there’s much more to payroll than just writing checks. That’s where payroll software comes in: It helps simplify and streamline your in-house payroll processing.
There are a number of vendors that provide payroll software tailored specifically to the needs of small businesses. This guide will give you a head start on choosing the right system. We’ll cover:
This type of software is designed to help small-business users process payroll in house. It often includes modules for time tracking, tax filing and benefits administration. Small-business payroll software automates data entry and tedious processes that users would otherwise have to do manually, saving both time and labor costs.
There are many different solutions out there. Larger companies might need deeper functionality for managing human resources in multiple locations or tools for complex reporting as part of their payroll system. But small businesses typically need software with more basic capabilities, such as compensation, time tracking and tax filing.
These systems often come with some or all of the following core capabilities:
|Compensation||Found in every system, this application automates payroll processing. Users assign pay rates to employees, and employee hours are entered directly or imported. The system then automatically calculates wages and generates paychecks. Direct deposit options are usually offered, and bonuses, commissions, overtime and tips can be added.|
|Time and attendance||Time clock functionality allows employees to clock in and out. Administrators can also track employee attendance.|
|Tax filing||Automatically prepares, files and pays state and federal taxes. Alternatively, provides tax calculations and/or documents for users to prepare and file manually.|
|Insurance and benefits||Some systems have functionality for insurance and benefits administration. This allows users to enroll employees in insurance benefits and manage benefit elections. Paid time off can also typically be accrued and tracked.|
While there are many different solutions out there targeting smaller companies, not all small businesses are created equal. Consider what your requirements are as you begin researching products:
Basic payroll needs. If you are just looking for a basic solution to streamline payroll processing, consider entry-level, affordable products with more limited functionality (e.g., Patriot PAY).
More robust workforce management. Perhaps you need a payroll system that also offers more robust tools, such as tax compliance and filing, insurance and benefits administration and employee management. There are vendors that offer greater functionality at affordable prices, such as Gusto (formerly ZenPayroll) and Wagepoint.
Payroll and HR for growing businesses. If your business is growing and you know you may need to scale up to a full HR suite, consider a vendor that offers tiered packages. These let you easily upgrade without having to learn a whole new system. An example of this type of system is RUN Powered by ADP.
There are many benefits of choosing small-business payroll software over manual payroll processing. These include:
Automation of tedious processes. First and foremost, you’ll save time once spent cutting checks and filing taxes. This software automates these processes so you have more time to spend building your business.
Reduced labor costs. You’ll also save money by cutting down on labor costs associated with payroll processing. For some companies, small-business payroll software can even eliminate the need for a full-time payroll employee.
Greater accuracy and lower risks. In addition to saving time and cutting costs, a good payroll system will increase accuracy and decrease risk. Automated payroll processing eliminates the possibility of human error. The software will also remind you of important deadlines, so the risk of incurring penalties decreases significantly.
Integration with existing software. Many small-business payroll systems integrate with other HR and accounting software your business may already be using. This can streamline operations and reduce errors even further.
Here are a few trends to be aware of as you search for new software in this market:
Cloud-based software. Most of today’s small-business payroll solutions are deployed in the cloud. Since users log into the software from their Internet-connected device, cloud-based systems can be accessed from anywhere.
With traditional on-premise systems, businesses had to buy updated software each year to keep up with changing tax laws. Now, cloud vendors simply update their products as laws change, and the changes are reflected in users’ systems automatically—with no need to buy anything new.
Mobile accessibility. As cloud-based software has become more popular, so too has mobile access to payroll systems. Many vendors now offer native mobile apps for smartphones and tablets, which provide a seamless on-the-go experience.
Some vendors offer employee self-service mobile apps, as well. These allow workers to access their own salary and benefits information remotely. Look for this trend to continue in the future.
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