Technology Counter Payroll Software Buyer's Guide
What is Payroll ?
What is the first thing that crosses your mind when you hear the word Payroll? Chances are you will link payroll to a solution that issues paycheck. Though paycheck is one of the most crucial elements of the online payroll solution, this software performs a wide range of functions such as withholding or filing taxes, managing deductions, and so on.
What if all these payroll-associated tasks are automated? What if you don’t have to calculate the payments or go through the hassle of deducting the taxes from employees’ compensation? The good news is that it is possible! That’s where the online payroll management software comes into the picture. As the name implies, payroll software is designed to automate the whole payroll procedure. With this software integrated into your business, you do not have to complete the payroll process manually.
What is Payroll Software?
Simply put, payroll refers to the total amount a company is supposed to pay to its employee for a specific period. It is the responsibility of an employer to make sure their employees and staff get fair compensation for their hard work. As much as important it is, payroll can turn out to be an overwhelming task for an employer. Think about it – you have to track the number of hours and days each employee has worked. You have to deduct taxes from the final payment and distribute fair compensation to each worker.
Whether you hire an accountant for the job or integrate a cloud-based online solution to automate the task, you will need the HR payroll software to issue paychecks to your employees. You need a system that tracks your employee’s working hours as well as productivity. A system that helps you understand and calculate tax deductions.
Payroll processing software is a must for large-scale and medium-sized firms. There is no way you can carry out the salary disbursement process on your own. Things get super complicated when you have several departments and each department has hundreds of employees. Even if you hire a qualified and experienced HR team and a few accountants, you are going to need an automated payroll management solution to complete the payroll process.
In today's busy schedule, it is nearly impossible for large-scale firms to track employee's work hours and productivity status every month. And, that's not the only issue. You will have to get familiar with the state and federal laws about salaries and tax rates to deduct the right amount from employee's paychecks. Let's say you manage to issue paychecks after deducting taxes. But, what about managing the employee salary records? The employer's duty isn't limited to issuing paychecks. They are supposed to keep records of the total amount they have paid to each employee, the deductions, time-off payments, and other benefits manually. This can turn out to be a hectic and time-consuming job for even a small-scale company.
As an employer, you have to run the business and supervise your employees. You will probably want to invest a significant amount of time and energy in performing the management and marketing tasks. There are times when employers decide to expand their business to the international markets. After all, you will need to grow your brand and the audience to survive the fierce competition. An important part of growth is adapting to technology and the latest trends. Automating your payroll process will not only save you plenty of time, but it reduces the risk of manual errors.
The cloud-based payroll software can automate a broad range of payroll tasks. Basically, it allows employers to focus on productivity rather than calculating employee's paychecks and deducting taxes. High-quality software enables your employees to get a glimpse into their payment information and the breakdown of the benefits.
Common Capabilities of Payroll Management Solution
The payroll business management solution offers tons of services. Gone are the days when businesses would hire a qualified and trained payroll service provider to issue paychecks to the employees.
Do you know this is often the first and most important technology that startups and new companies purchase? They know how this cloud-based solution can save time and streamline business management. When you are searching for a payroll system, you need to ensure that the solution you are buying and integrating into your firm can offer you the best features. As mentioned above, this software is capable of performing an extensive range of tasks as long as you purchase the best one. Whether you have just started your business or running a multinational company, you must buy the payroll solution that fits your business requirements and budget.
Business owners must pay special attention to the functionalities of the software they purchase. Here, we have mentioned some important yet common capabilities of quality and reliable payroll management system software. Let’s have a look:
- Direct Deposit
A direct deposit is a common method to pay your workers. In direct deposit, the payment is initiated from the employer's bank account and is transferred to the worker's bank.
There is a reason why the direct deposit is considered the most sought-after method for payment disbursement. First, it is a faster and safer way to transfer payments than payments through mails. The most important reason is that direct deposit saves the details of every transaction in your digital records.
The time when employers would hand out the paycheck to each employee on the weekend is long gone. Direct deposit is one of the important features of the payroll software. It saves you the printing cost of checks. Basically, it is a win-win for employees and firms. Your employees get their payments on time and you don’t have to record each transaction manually. The details are recorded digitally.
- Tax Filing
Another important functionality of a payroll management solution is tax filing. It enables you to automate the calculation of state, federal, and local taxes your business is supposed to clear.
Like any manual calculation, filing your taxes and calculating the exact amount you owe to the government can turn out to be a hectic task. Moreover, there is a chance you will end up making errors in the calculation. To prevent such issues and miscalculations, it is best for businesses to leave this challenging task to the payroll management solution.
The best online payroll management software is not only capable of calculating your taxes, but it sends these documents to the right agency. Research suggests one in every 3 small firms spend over 40 hours every year in calculating and filing their federal taxes. If you calculate taxes on your own and make errors, there is a high chance you will face delay in the return.
- Compliance Management
The employment regulations are getting tougher every year. If the government passes a new overtime rule in the coming years, then it will make payroll even more challenging for businesses.
So, instead of worrying about these new laws and the current regulations, why don't you let the payroll management software manage the process for you? There is no denying that businesses face a lot of difficulties in keeping their employee's payroll process in line with the current state or federal laws. First, you will have to understand employment laws. The second step is to adjust your current payroll procedure according to these new federal laws.
Compliance management is an important feature of the open-source payroll software. Given that the software you have purchased offers compliance management features, rest assured the system will automatically be upgraded if the government passes any new employment law.
- Employee Self-service (ESS)
Is it possible for you to check all your employees’ remuneration accounts manually if an employee of your firm enquires about their salary? Chances are you don’t even have time to access your payroll management system to gather information about your worker’s salary, let alone looking into the accounts book.
ESS or Employee self-service feature in the payroll processing solution can take one of the biggest burdens off your shoulder.
The software enables employers to provide their employees with access to software. You get to provide them with the unique login details. Every time they need to search for information or make updates, they can do it themselves. You can select the employees you would like to access the system. They only need to submit their login credentials to get access to the software. Before you make a purchase, make sure the payroll processing software you are buying offers the ESS functionality. It must be customizable. Ask if the user's permission can be customized. After all, you may not want each employee of your firm to access the software.
Though almost all types of best payroll related software have employee self-service features, it is best to check it and discuss this functionality with the vendor before making a purchase. Another important thing to consider is mobile-compatible software. Not every employee has a laptop. Even if they have access to the desktop, it is going to be uncomfortable for them to bring their laptops to work unless it is part of their job. So, make sure that the software works well on smartphones. Whether the vendor offers a mobile-compatible website or a standalone mobile application, it must feature an intuitive design and a user-friendly interface. The last thing you want is your employees to keep asking you to open the software.
- Accounting and Time Tracking
When you initiate payment from your bank account for business expenses, you have to make an entry for the transaction in a separate ledger. Basically, your accountant is supposed to record these entries in the accounting books so that they can prepare the financial statement for your firm. But, imagine if you could record all these transactions automatically? Well, that is possible with the payroll process system.
Another great feature of this cloud-based solution is its ability to link the accounting software to payroll software. Every time, you make payment through this software or make any monetary updates in the solution, the same will automatically be recorded in your accounting software. Similarly, you can link your payroll solution to time-tracking software. When your employee updates their working hours for the month or the number of days they were present in the time-tracking software, the data will be recorded in the software as well. This will help you with the final wage or salary calculation according to the employee’s performance and the total working hours.
Though accounting and time tracking are two different functionalities of a payroll management solution, they both save you plenty of time in entering duplicate entries. In addition to saving you time and efforts, the integration of these solutions to your payroll can reduce the chances of manual data entry errors.
Make sure to ask your vendors if the payroll management solution can be integrated with third-party apps and software. How can you integrate these solutions? If you already have the time tracking and accounting systems installed, ask your vendor if they can help you integrate these systems with the payroll processing software.
Most types of business software feature a reporting module that provides the users with a comprehensive report of their business management. The payroll management solution offers a business report that gives you a quick insight into the payroll process throughout the year. It is an important tool to learn about your payroll system as well as the latest trends.
The software provides you with a clear view of your budget, payroll info, and taxes. This information can help businesses to improve their accounting operations. Moreover, you can use this information to improve your payroll process and ensure cost-effective business operations.
Who Uses a Cloud-based Payroll System?
The payroll system is more of a necessity for large-scale and medium-sized businesses that employ a large number of workers. It is also important for companies that hire third-party, temporary freelancers as well as permanent and full-time workers. Payroll systems comes handy when it comes to handling the mix of traditional workers and gig workers. But, the question is 'do you even need a cloud-based payroll processing solution'?
Well, if your firm pays a couple of independent contractors, then this software isn’t needed. All you got to do is write them a paycheck or send their payment by direct deposit. The reason is quite simple – companies are not responsible for deducting their taxes. So, you don't need a payroll solution if you work with a few independent contractors.
On the other hand, companies that pay salaries or wages to their employees need a payroll management solution. Some business owners need to pay themselves the monthly salary as an employee of the organization. So, if that is the case, you are supposed to hire an HR team and install payroll processing software to automate the calculations. Only the independent contractors are responsible for paying their taxes themselves. If you are still not sure, talk to a tax advisor and discuss it with them.
Why Do You Need a Payroll Management System?
SMEs do not pay attention to the risk of potential human errors that could have a negative impact on the payroll process, employees, and the organization as a whole. An effective payroll management solution can help reduce manual errors to a great extent. Here we've mentioned a few important reasons why you need payroll management system software.
1. Efficient Use of Time
Companies spend hours working on payroll processes. Issuing paychecks, calculating the right amount, deducting taxes & benefits from the net payment, and generating accurate HR reports are some of the tedious and time-consuming tasks.
Using an advanced HR and Payroll management solution can save your time in calculation. It automates the whole payroll procedure and saves a countless number of hours you would otherwise spend on tax preparation.
2. Reduce Errors
Miscalculations are a part of manual error. Not only do these errors lead to penalties, but they can wreak havoc in your payroll system.
You can customize the payroll management software according to your firm's requirements. It can be customized according to the pay structure of your organization. This reduces your burden of checking if all the conditions are fulfilled when issuing the paycheck.
4. Employee Access
Employees get the opportunity to view their payment records, salaries of other employees, and the benefits. This promotes transparency in payment. Furthermore, it boosts your employees’ morale and encourages them to work harder.
5. Easy Integration
To lower the management pressure, you can integrate different apps and software with payroll management solutions. It streamlines your business operations by linking different departments to the Payroll system.
Payroll Management System for Different Businesses
Different types of payroll management software are available for different businesses. Depending on the nature and type of your firm, you can opt for an Enterprise-level payroll solution or the software for self-employed payroll processing.
Payroll for Enterprises
You don’t want to buy high-priced and premium software only to discover that it doesn’t cater to your business requirements. Unlike the regular payroll processing systems, enterprises need a high-quality and advanced system that could cater to the varying requirements of the business.
The major challenge for such businesses is the switch from older and traditional models to a new system. It might be difficult for employers to train their workers and make them familiar with the new payroll management solution.
Payroll Software for Self Employed
Self-employed workers are supposed to file their returns every year. You don’t get your payment after tax deduction. In fact, it is something you have to do on your own.
As a self-employed individual, you must be getting your payment as salary, dividend, and other distributions. Depending on your state and federal tax laws, the tax percentage can vary by region. It is best to purchase the quality payroll for small businesses and leave the calculation to the software.
Payroll Software System Market Trends
Do you know 40% of SMEs have to pay payroll penalty annually? These penalties are imposed on businesses that do not pay their returns on time or file errors. The news doesn’t come as a surprise since payroll calculation is super difficult. It is not just a monthly salary, but you have to consider several factors such as employee incentives, benefits, and tax deductions. What makes it even more complicated is the fact that each state has its own federal and state laws regarding tax deduction and employee wages. You don't want to add tax penalties to your business expenses.
As the technology is growing, new trends keep emerging in the payroll industry. Payroll processing software has gotten better over time. In this section, we will walk you through the latest payroll trends that every business must know. Let's get started.
- Cloud Technology
Businesses have already started to embrace cloud-based payroll software. Cloud-based systems enable users to gather data from any device.
This system is mainly useful for HR departments that work from home. Now, accountants and managers do not need to visit the office. The software enables employees, supervisors, HR members, and staff to collect real-time information about their salary, leaves, and overall performance.
The on-premises payroll system is not only difficult to install, but it comes with a higher risk of getting hacked. So, businesses have to spend hundreds of dollars for the security of the on-premise payroll system to ensure that their data and confidential business information is safe. Cloud-based payroll software, on the other hand, is easy to setup. It doesn't need a security system as only the employer has the right to grant software access to other employees and HR members.
- Artificial Intelligence
Movies have made it quite normal for people to think that artificial intelligence and bots will take over humans in the future. Well, it is true to some extent. In certain industries, robots have started to replace workers.
Technology has also played a vital role in the payroll industry. Earlier, payroll was a simple process. It involved the calculations of the employee's monthly salary or wages and issuing a paycheck. The manager would prepare a general report. That's it! But, that's not the case today. The payroll is revolutionizing. There is no doubt Artificial Intelligence has changed the way the employees are paid. Nowadays, companies have started to pay employees based on their worked hours, productivity, and their contribution to the company’s growth.
Moreover, it is important for businesses to gather and analyze a significant amount of payroll data. The annual payroll data can provide you with an insight into the employees' expenses, the company's budget, and the growth of the firm. Another advantage of artificial intelligence in the payroll system is the chatbot. Now, HR managers can ask chatbots their non-urgent questions instead of contacting the employees or disturbing the manager.
- Integration of other Software
While HR management and payroll process are two different concepts, they are connected. If you link your HR technology with Payroll management software, you will be able to access a vast amount of information from a single, user-friendly dashboard. The major benefit of linking HR technology with payroll is the efficient management of employee’s data.
HR solutions help you with employee tracking, accounting, employee productivity management, and more. If these two systems are integrated, it becomes super simple for managers to share employee's data across systems. This also ensures that no employee is overpaid or underpaid. The time and productivity of your employees are tracked and recorded accurately in HR software and payroll system.
When you get access to data in a single system, you can generate actionable insights and compensate your employees accordingly. Basically, this integration allows managers and HR departments to collect a personalized report of their employees.
- Higher Demand from Freelancers and Gig Workers
The growth in technology has resulted in a rise in the number of freelancers. As technology enables people to work remotely, many people have started to work as freelancers. There has been a shift from full-time employees to third-party workers. While it is quite convenient for freelancers to work from home, this has made things quite complicated for old businesses.
Handling the dynamic workforce is a major challenge for old and traditional firms. An efficient way to manage full-time or permanent employees and freelancers is the payroll management software. Now, tracking the number of hours the freelancers have worked is super easy with a quality payroll solution. You can gather information regarding their worked hours, productivity, and performance. This allows you to issue their payments on time.
- Financial Wellness in the Employees Package
There is a strong connection between employees’ retention rate and satisfaction rate. The more you keep your employees satisfied, the better their performance will be. Most employees find it difficult to focus on work with the mental stress and the tension of their financial well-being. Too much stress can lead to physical and mental health issues.
To get your employees to perform their best, you need to reduce their financial stress and boost their motivation. That is the reason why payroll solution developers have started to integrate financial wellness programs in the software.
Financial wellness programs offer financial counseling to your employees and some tips on where they should allocate their money to save for retirement. It also provides them with the best guidance for the retirement plan. The program might not increase their salaries, but it is a great way to motivate your employees and guide them in the right direction. There is a good chance the workers will spend more time focusing on work rather than stressing over their financial well-being.
- Transparency in Payments
More and more businesses plan on making the salary and wage-related information accessible to employees. Gone are the days when only people at high posts were allowed to access the employees' reimbursement details. Today, companies have started to provide even part-time workers access to payroll management system. The companies take this step to clarify their pay structure.
There couldn’t be a better way to boost your employees’ morale than by allowing them to know how you distribute payments among employees. This gives them the idea of ‘why they are paid what they are paid’. It promotes the sense of equality and fairness among your workers. This also encourages your employees to perform their best. By allowing your employees to access the solution and get a glimpse into the payment disbursement structure of the company, you eliminate the unbiased treatments among your workers.
- Improved Data Security
The new regulations have made it mandatory for the payroll solution to be GDPR-Compliant. This ensures that the confidential or sensitive data you update in the system will be protected. Companies have a large chunk of confidential information that needs to stay between the employees and the firm. This includes their wages and salary, personal details, bank account numbers, and social security numbers.
The payroll systems are designed with dual authentication security feature. Only people who are given access to the software can log into the software and access the data.
How to Choose the Best Payroll Software Vendor?
Now that you have finally decided to install the payroll system, it is time to start research and find the best payroll vendor. An ideal payroll system is the one that fits your business requirements and offers features that can benefit your organization in the long run. You need to look for a system that streamlines your payroll processes and helps you issue paychecks on time. Moreover, you must be able to access the software anytime and anywhere.
Here are a few tips you must consider when selecting a payroll vendor for your business.
- Does the package include other services, such as HR, attendance, benefits, advanced reports, and more?
- What payroll taxes are included in the system?
- What price structure does the vendor follow? Remember that some vendors use price-per-worker format, while others charge monthly subscriptions.
- Does the payroll system provide you with real-time insight into the employees' data?
- Do you need to be chained to your desktop to access the payroll system or is the software compatible with multiple browsers and devices?
- Can you customize the payroll processing software according to your firm and employees' requirements?
- Does it offer a self-service feature for employees? Will they be able to access the information about their wages or salary, deductions, and other details?
- Is the software easy to install and use?
- Does the vendor offer high-quality and round the clock customer support service? Do they look into the technical issues?
- Last but not least, what kind of security features does the system offer?
Before you purchase this software, make sure to get the answers to the above-listed questions. You don’t want to buy the subscription for an expensive solution that isn’t compatible with smartphones.
Research the latest payroll management solutions on the internet and choose the most suitable one. Remember to discuss the features and installation process with the vendor before sealing the deal. Remember that not all free online payroll software vendors offer the best product.