Choosing Payroll Software

To evaluate your payroll needs, answer these ten questions about your business and its payroll system.

What Is the Size of My Business?

When considering payroll software, you don’t need to think about the size of your business in terms of its turnover or number of customers. You need to take into account just two things: how many employees do you have currently and how many more are you likely to add in the near one to two years?

What Type(s) Of Employees Do I Have?

You can have both regular employees and independent contractors on your payrolls. Additionally, you might pay your employees a fixed monthly salary, hourly wages or a base wage plus commissions or tips.

Payment structure and taxation requirements for each of them differ and you need to know these numbers to evaluate your payroll needs. If you have only independent contractors, you might be able to meet your needs using online payroll software, which is usually cheaper.

How Do I Pay My Employees?

Do you need to make direct deposits or handle check payments? Do you need to make international payments via platforms like Stripe and PayPal? Think about how you will get money from your bank account to your employees’, and make it as painless as possible.

How Often Do I Pay My Employees?

Do you pay all your employees at one time or do you have different schedules for different categories? For instance, you might be paying them weekly or biweekly. In the case of independent contractors, you might be paying them anytime they invoice you.

The payroll system should be able to handle these payouts in addition to off-cycle payments like expense reimbursements, bonuses, commissions, etc.

Are All Employees Based Out of the Same Location?

If you have employees spread across different states or around the globe, you will need to meet more regulations. With hybrid and remote work becoming commonplace as a result of the pandemic, you must consider if you might have people working from different locations in the future.

Who Is Responsible for Processing Payroll?

If you have a dedicated person or team for processing payroll, you will likely be able to manage with a DIY payroll software, which could be cheaper. Otherwise, you should consider investing in an outsourced payroll service even if it is more expensive. This will help ensure that payments are processed accurately and on time.

What Are My Local/State Payroll Laws?

The payroll laws depend upon the locality, state and countries where your employees reside. You must know what city, state, federal or international payroll laws you need to comply with. If you’re not sure, contact a payroll professional in your area to get some guidance.

How Do I Want Payroll Taxes Handled?

Payroll taxes can get complex and tedious as your business grows. You need to decide if you want the new payroll software to handle taxes or not. If the answer is yes, look closely at the cost for year-end calculations because that usually comes with an extra price tag. If you don’t, make sure to hire a reliable tax professional to handle this process for you.

What Deductions Do I Need To Plan For?

Before disbursing payments, you need to withhold deductions for taxes (income tax, social security tax, etc.), wage garnishments (unpaid loans, alimony, child support, etc.) and benefits (health insurance, etc.).

What Is My Budget?

Cost is an important factor when choosing a payroll software. You must have a ballpark figure in mind that you are willing to pay monthly or annually to meet your payroll needs. This will help ensure that you don’t overextend yourself when you are tempted to pay extra for à la carte features.

After answering these ten questions, you must have gained a fair idea of what you want out of your payroll software. Now it’s time to evaluate the different payroll software available in the market, depending upon your unique requirements.

Answering these next five questions will enable you to shortlist payroll service providers faster. At the end of this section, you should be able to list out the essential features of your chosen payroll software. We strongly advise you to make a list of optional “good to have” features as well so that you can maximize ROI.

Do I Need Integrated Time-tracking Capabilities?

If you have only salaried employees, you might not need time-tracking capabilities inside your payroll software. However, if you pay hourly wages or need to keep track of hours worked by independent contractors, it might be a good idea to have integrated time tracking. This will streamline your payroll process and reduce errors in calculation.

Do I Need Other Integrations?

Payroll cannot run in a vacuum. It runs in tandem with other business operations like HR, accounting, time and attendance, etc. You will need to transfer data between these systems. Most payroll software allows you to upload data from spreadsheets, regardless of the software it originated from.

But software integrations that create a unified HR workflow can eliminate the manual intervention needed, saving time and reducing the scope for errors.

Do I Need Self-service Access for Employees?

Do you want your employees to be able to enter and update their basic information in the software or do you have a team to handle it? If you are a small company, enabling employees to update their data, with suitable validation requirements in place, could be a good idea to save time and resources.

How Hard Is It To Set Up?

It’s important to know if you can set up the payroll software yourself or if you need someone to guide you through the process. Remember that not all payroll software comes with built-in premium support. That is sometimes an add-on you must be willing to pay for if you do not have in-house expertise.

How Often Does the Software Update To Stay Compliant?

Payroll compliance is essential for companies of all sizes. When you are shopping around for payroll software, you need to check how often the software is updated to stay compliant with changing laws or labor payment rates.

Budget is an important consideration for every business purchase decision. Online payroll services typically charge monthly, but look at the annual costs too—especially if you are choosing annual services like year-end payroll tax calculations.

Besides a fixed monthly cost, online payroll services often charge per transaction or employee payment. This implies that the larger the number of employees, the greater the transaction fee.
If you are planning to expand employee strength, carefully consider how the prices will keep changing while you are growing. Most payroll software providers have a tiered payment structure to cater to businesses of different sizes. Evaluate which tier would be least expensive for you in the long run before signing up.

You might need to opt for paid add-ons to ensure you have all the “must have” features in your payroll software. Be mindful of how much they cost. If you can squeeze some “good to have” features as well, do so, but don’t overextend yourself.

To sum up, these are some of the costs you need to look at before you make a final decision:

• Base subscription fee
• Setup & support fees
• Taxes and compliance fees
• Per-employee fees
• Add-on fees