Payroll Software: A Guide On How to Pick The Right One

Selecting the right payroll system for your company can save you time, reduce administrative burdens, and ensure your employees are paid correctly and on time. Payroll software varies widely, offering different features and price points, so choosing the right one for your specific needs is crucial.

Understanding payroll software

Before diving into how to choose a payroll system, it’s essential to understand what payroll software does. Payroll software automates the process of managing employee payments, calculating taxes, and ensuring compliance with employment laws.

Common features of payroll software

Payroll software typically includes these features:

• Automated payroll processing: Automatically calculates pay based on hours worked or salary, withholding taxes, and other deductions.
• Direct deposit: Many systems offer direct deposit, so employees can receive payments quickly and electronically.
• Tax compliance: Payroll software can manage tax filings and withholdings, ensuring that businesses remain compliant with local, state, and federal laws.
• Employee self-service portals: These allow employees to access their pay stubs, tax documents, and update their personal information online.
• Integrations with other systems: Good payroll software integrates with accounting, HR, and time-tracking tools to streamline your business operations.

How to choose the right payroll software for your business?

There are plenty of payroll software with their unique features and benefits. To help you decide how to pick the right one, follow the steps below:

Step 1: evaluate your business needs

Before choosing a payroll system, the first step is evaluating your business’s unique needs. The right software for one company may not be the best fit for another, so it’s essential to identify the specific requirements of your business.

Employee type and size

The type and number of employees you have can significantly impact your payroll software needs. For example, a company with salaried employees may have different requirements than one with hourly or contract workers. Some systems focus more on handling hourly wages and time tracking, while others cater to salaried workers and benefits management.

Budget considerations

Cost is a critical factor in how to choose payroll software. Payroll systems generally charge a monthly fee, sometimes with an additional cost per employee. Ensure that the system you select fits your budget while offering the features you need. It’s important to differentiate between essential features and extras you might not require.

Payroll and HR expertise

Evaluate who will be managing payroll within your organization. If you have HR staff or someone dedicated to running payroll, they may benefit from more advanced software that integrates with HR systems. If you’re a small business owner running payroll yourself, a more user-friendly solution with simple features might be best.

Step 2: narrow down your payroll service options

Once you’ve assessed your business needs, it’s time to narrow down your options. The market offers a range of payroll services, each with different capabilities. Let’s explore some common payroll solutions and how they compare.

Online payroll software

Online payroll software is a popular choice for small businesses. It allows you to manage payroll entirely online, offering services like tax filing and employee self-service portals. Many providers guarantee that any tax penalties due to their mistakes will be refunded. When choosing a payroll system, ensure the software offers all the features your business needs while staying within budget.

Local payroll services

If you prefer to have in-person support, local payroll services may be a good option. These providers can handle everything from payroll processing to tax filings and are often more flexible in offering personalized service. However, local services may not always offer the same level of technological integration that online solutions do.

Bookkeepers and Professional Employment Organizations (PEOs)

Some businesses may opt for bookkeepers or PEOs to manage payroll. Bookkeepers are helpful for companies that need hands-on payroll management, while PEOs can serve as co-employers, handling not only payroll but also HR functions. These options can be more expensive, so they’re better suited for businesses with more complex payroll needs.

Step 3: compare payroll software features

Now that you have a shortlist of options, the next step in how to choose a payroll provider is comparing the features of each system. Payroll software can vary in functionality, so make sure to choose one that meets all your operational requirements.

Tax calculations and filing

Handling taxes can be a complex task, so a payroll system that automatically calculates, withholds, and files your taxes can save you significant time and stress. Some software even updates tax rates automatically, ensuring that your payroll is always compliant with current tax laws.

Direct deposit and payment flexibility

In today’s world, direct deposit has become the standard for paying employees. When choosing a payroll service, make sure it offers direct deposit, as this will streamline your payment processes and eliminate the need to print checks.

Integration with other business tools

One key feature of payroll software is its ability to integrate with other business tools like accounting software (e.g., QuickBooks) and time-tracking software. This integration simplifies payroll processing and ensures that your financial records remain accurate. The best payroll systems sync effortlessly with your existing tools, preventing the need for manual data entry.

Mobile access and flexibility

Mobile access is becoming increasingly essential for business owners who manage payroll on the go. Many payroll systems offer cloud-based solutions, allowing you to access and manage your payroll from any device. If your business operates multiple locations or has a remote workforce, mobile access might be a feature worth considering.

Step 4: test and finalize your decision

Once you’ve compared features, it’s important to test your top choices before making a final decision. Many payroll software providers offer free trials, allowing you to explore the interface, test the features, and determine whether the software will be a good fit for your business.

Free trials and customer support

A free trial gives you the chance to evaluate how easy the software is to use and whether it meets your needs. During this period, test the software’s features, such as tax filings, direct deposits, and employee portals. Additionally, review the customer support options available—strong customer service can help resolve issues quickly and ensure you’re getting the most out of your payroll software.

Read reviews and gather feedback

Before committing to a payroll provider, read customer reviews and seek feedback from other small business owners. Reviews on platforms like G2, Capterra, and TrustRadius can provide valuable insights into how reliable and user-friendly each software option is.

Getting back to business

Choosing the right payroll system can feel overwhelming, but focusing on what your business needs—like tax management, easy integrations, or employee self-service—makes the decision easier. Once you find the right fit, you’ll have peace of mind knowing payroll is handled smoothly, allowing you to focus on growing your business and supporting your team. It’s an investment that helps your company run more efficiently and successfully in the long run.