This article is for educational purposes and does not constitute legal or tax advice. For specific advice applicable to your business, please contact a professional.
You’ve already decided that your business can benefit from a payroll service. And why wouldn’t you? Payroll software helps you save time so you can get back to running and growing your business.
But when you start to research your options for full-service payroll, the list of core software features, services, and add-ons can feel a bit overwhelming. And it’s hard to know what you should be focusing on to make a decision. So we’ve put together a list of five key areas to review when you’re comparing payroll service providers.
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1. Your business needs
Before you can compare your payroll software options, you need to have a clear idea of what your business needs from a full-service payroll provider. Here are a few questions to ask yourself:
- What size is your business? How many workers do you have?
- What kind of workers do you have, contractors or employees?
- Do those employees have benefits? If not, do you plan on offering your team benefits in the future?
- Who will manage payroll, and how much time do they have to devote to it?
- Does your payroll manager always work from the same place?
- How comfortable is your payroll manager with regulatory and legal issues when it comes to payroll?
- How much budget do you have to allocate toward payroll processing?
- What is your biggest pain point in your current payroll process?
Use your answers to these questions to guide you through the rest of the criteria you need to evaluate before you choose payroll software for your small business.
2. Payroll features
Whether a payroll service’s features are must-haves or nice-to-haves is really dependent on your answers to the questions above. But there are some features you should definitely be on the lookout for from any small business payroll service.
- Tax filings: Taxes are definitely the trickiest part of running payroll for all types of businesses. Look for a service that generates and files your federal and state payroll taxes (and makes payments as well).
- Other compliance factors: When you bring on employees, your compliance obligation extends beyond taxes. Look for a service that helps you track paid sick leave and paid time off and that automatically calculates pre- or post-tax deductions for benefits every time you run payroll. Some payroll services will also take care of documentation like new hire reports, which have to be submitted to the state where each of your employees work.
- Integrated timecards: Save yourself some time by making sure your payroll software integrates with your time and attendance software. That way, you don’t have to spend time manually inputting hours before each pay run. The best payroll software is able to calculate overtime once timecards are imported.
- Direct deposit: Allow your workers to have their pay transferred directly into their bank accounts instead of mailing out checks every pay period.
- Self-service portal for staff: Whatever service you choose should provide an easy experience for your employees (as well as the person in charge of payroll). Allowing your staff access to online accounts where they can pull pay stubs and update contact information saves you time sending documents or chasing down addresses.
- Employment options: Do you employ contractors or full-time employees or both? Most payroll services only cater to contractors or employees. So if you have both (or think you might in the future), you want to look for software that allows you to run payroll for both. That way you don’t have to jump between two different programs and you won’t have to manually consolidate records.
- Payroll integrations: We’ve already mentioned it a few times, but ensuring your payroll software integrates with your other systems is critical — it saves you time and costly mistakes. So check to make sure your employee management software, your POS, and/or bookkeeping software integrate with whatever small business payroll service you choose.
3. Cost of payroll software
The cost of payroll software is dependent on both the service you choose and the needs of your business. On the low end, it might cost you somewhere in the $20 to $30 range; on the high end, you could pay several hundred dollars per month.
Most payroll services don’t just charge a flat fee each month. Instead they charge for both the use of the software and the features you take advantage of. They may also charge differently depending on whether you’re paying employees or independent contractors. So when you’re evaluating pricing for payroll software, here’s what you should look for:
- Base cost: Most payroll services charge a base account or subscription fee. You need to be sure of what is included in that cost and, more importantly, what is not. Check out each service’s website for pricing details, and some may also include information on how much you might save if you switched payroll providers. If you can’t find this information, contact them.
- Pay runs or workers: Most services charge a fee based on either how often you’re running payroll — whether it’s weekly, biweekly, or monthly — or the number of workers you’re running payroll for. Some charge for both. When you’re evaluating options, pay attention to how the service charges so you can estimate monthly costs.
- Taxes and compliance: Some payroll software services charge for assistance with taxes and other types of compliance. This might include W-2 printing, mailing, and reporting to government agencies. And the cost of this assistance may depend on the complexity of your payroll, such as whether or not you contribute to your employees’ pre-tax benefits (401(k), HSAs, FSAs, etc.).
- Miscellaneous: There may be other costs that fall outside the first three categories. Some payroll services, for example, charge extra for direct deposit, paper checks, check signings, and per-envelope stuffings. You’ll also want to ask if there’s an additional charge for setup fees.
This list is not exhaustive, but rather a jumping-off point to review the costs of working with any small business payroll provider. You need to ask a lot of questions so you aren’t caught off guard by hidden fees.
Many payroll companies provide resources to help small businesses get onboarded with their payroll services. Many have email and phone support in case you have a time-sensitive payroll issue. But sometimes this support comes with a cost. Ask about these costs up front so you can budget accordingly.
5. Ease of use
As important as paying your staff is, payroll should be almost a “set-it-and-forget-it” task, after the initial setup of entering an employee into the system.
You shouldn’t have to be an accountant to understand how to use payroll, and your software should also be easy enough for all your employees to use, if necessary. Square makes it possible for small businesses to pay employees and contractors in a few clicks. In addition, we allow you to automate payroll so you never miss a pay run.
When you turn on Square Automatic Payroll, we automatically import timecards, calculate salaries and deductions, and run payroll for you each pay period. Before each payroll run, you get an email confirming what your employees will be paid and have until the end of the day to cancel or make any changes as needed. Then you can just sit back and relax.