Key points about choosing payroll software:
- Payroll software automates payroll and tax-filing processes to save your business time and money.
- Understanding your payroll needs, establishing SMART goals, and setting a budget will help you evaluate payroll software options.
The right payroll software will make your job easier by automating deductions and tax filing, accurately tracking time and expenses, and more. Given that 86% of HR professionals say their stress levels have increased in the past year, it is especially important to choose payroll software that will streamline and simplify payroll and tax-filing processes.
This guide will help you determine your payroll needs and lead you through the steps of evaluating, comparing, and eventually choosing the right payroll management system for you.
What are the benefits of payroll software?
As anyone in the HR field knows, paying employees correctly and on time is not as straightforward as it sounds. No matter the size of your company, tracking employee benefits, expenses, and leave—and managing state and federal taxes—is complex.
Payroll software can help save time, money, and frustration. Here’s how:
Payroll software can make many processes more efficient by accurately and automatically tracking payments, deductions, leave, and hours worked. You can automatically generate pay stubs and annual reports and store them in a central location. Reports and forms can be standardized, helping you save time and stay organized.
Over half of American workers (an estimated 82 million individuals) report at least one paycheck error during their career. For some, it’s a minor inconvenience. For others—like the 3 in 5 Americans who live paycheck to paycheck—an underpayment or a late payment can mean an overdue bill or worse. Payroll software’s ability to automate calculations and payments can eliminate many instances of human error, which is invaluable to your employees.
The IRS levied almost $6 billion in employer penalties in 2020; some of these stemmed from innocent miscalculations. That’s not a statistic you want to be part of! Most payroll management systems will monitor for and alert you to relevant changes to state and federal tax regulations—saving you from missing out on crucial details.
Modern payroll software includes system access limits and other safeguards to ensure data integrity, as well as ways to monitor for and identify irregularities.
Automated processes and report generation, fewer errors, better recordkeeping… payroll software will save you time in varied ways, many of them specific to your business. But there is one constant: reduced workload for accountants and/or HR personnel. And that means you have more time to focus on other areas of the business.
Determine your payroll and tax filing needs
Before you delve into the payroll software options available, take time to evaluate your current payroll system and what your requirements are.
Understand your payroll needs
Be sure you have the answers to basic questions about your payroll, including:
- How many employees do you have?
- Do you do payroll for multiple companies?
- Do you have remote employees?
- Are your employees paid hourly or an annual salary—or both?
- Do you have employees in multiple states or international workers?
- How is vacation or leave-time calculated?
- Do you need to comply with legislation other than state and federal payroll law?
- Do you want to print pay stubs?
- Do you pay via direct deposit, paper check, or another method?
All of these factors affect your payroll and the features you will require of your payroll software provider.
Set SMART goals for your software
What do you want to achieve with your payroll software? How will you measure success or ROI? Taking the SMART (specific, measurable, achievable, realistic, and time-bound) approach will give you solid goals you can use to work with and evaluate your software:
- Specific: What is your primary, specific reason for sourcing and implementing new payroll software?
- Measurable: How will you measure success? In time saved, the number of errors, or something else?
- Achievable: How will you achieve your goals? Who will oversee the process? Should you hire a consultant?
- Realistic: Do you have the time and resources to achieve your goals?
- Time-bound: When will your payroll management system be up and running? When will you achieve the goals you have set?
Define a budget
The cost of payroll software will depend on the features you require, the size of your business, and the provider you choose. Consider your current payroll budget, the changes you’d like to see, and what you’re able (and willing) to spend on a new software system. Take into account long-term savings of time and money.
Research payroll software providers
Now that you’ve done the background work, it’s time to turn to the marketplace. As you evaluate various payroll software options, keep your needs, goals, and budget in mind.
Every payroll system will offer a long list of features and capabilities. Assess how the varied offerings will meet your business requirements now and as you grow. Some features to watch for:
- Tax filing and year-end services
- Direct deposits
- Analysis and reporting capabilities
- Tax compliance
- Robust security
- Mobile access
- Accessible, expert customer support
- Employee self-service
- Available integrations
- Benefits, leave, and expense management
Stand-alone vs. all-in-one payroll management systems
You will come across options for stand-alone and integrated payroll systems. The best choice for you will depend on your business setup and needs. Stand-alone payroll systems will manage and automate payroll processes but are isolated from your other business systems. You will likely need to use APIs or manually transfer data if you decide to connect your payroll system to other software.
An all-in-one payroll system, on the other hand, is designed as part of a larger integrated workforce system, connected with your HRIS and other workforce applications. Because all of your HR and payroll information is in one place, you won’t have to manually update data in multiple places—changes you make in your HR system, for example, will be automatically captured in payroll.
Evaluate providers and make a selection
Create a short list of providers—try to narrow it down to three or four. If this is difficult, look back at your original goals. Given the complex and essential nature of payroll, you want a dependable provider, ideally one that has worked with your industry before. Read case studies and ask for references. When you’re ready, ask to schedule a demo with each of your top contenders. This will give you an opportunity to ask questions and see if the payroll software fits your expectations.
Meet your goals with the best payroll software
Effective payroll management is a critical part of business operations and employee relations. A payroll management system can alleviate some of the burden from your accounting and HR personnel and deliver payroll and tax filings that are compliant, accurate, and timely. Learn more about payroll and tax filing with SentricHR.