Paying your employees is an essential part of doing business. Do it wrong — or late — and you can run into plenty of legal issues and unhappy employees.
With that said, many business owners struggle with payroll. It takes a substantial amount of time, and navigating the nuances of payroll and tax compliance isn’t easy. Yet, these activities don’t directly generate revenue for your business. Because of this, many business owners invest in payroll services.
The right payroll companies can free up a lot of time for business owners to focus on business growth — without sacrificing compliance and payroll accuracy.
Thanks to advances in cloud technology and a move towards remote work, payroll software and outsourced services have both flourished. Here are some of the top options on the market:
Payroll services are outsourced or software solutions that help business owners pay their employees accurately and on-time while complying with all tax laws. Some also include HR functions to assist in compliance with HR issues. Nowadays, many payroll solutions offer business owners cloud access to run and analyze their payroll from anywhere.
There are three main types of payroll services. Most payroll companies and software can perform operations in most or all of these areas.
First, you have to record employee time and attendance correctly. This entails tracking worked hours, tardiness, absences, sick days, vacation, and so on. This information is used to calculate the proper payment for each employee.
Companies have to pay payroll taxes on the wages and salaries paid to employees. You also withhold taxes from employee paychecks based on certain factors. These calculations can get complicated if you aren’t sure of the rules. Payroll tax services help you calculate and withhold the correct amounts.
Finally, you have to pay out wages to employees. This is where paycheck services come in. The payroll service will pay the employee properly via their preferred payment method (check, direct deposit, etc.). Checks are usually given out on payday, whereas direct deposit can happen on or the day after payday.
Employees sometimes experience payroll issues that tangibly affect their pay. An employee that isn’t paid correctly is a dissatisfied employee. Consequently, business owners can see plenty of benefits from investing in a payroll program for their business.
Payroll software save you a lot of time by helping you load in the data you need and running payroll fast. Some payroll services offer automated payroll that you can run in only a few clicks. This frees up time for your HR department to work on higher-level tasks. If you’re working with a payroll firm, you can save even more time, as you simply send them your payroll information, and they handle the rest.
Payroll services allow you to pay for only what you need — which helps save money. If the economy slows down, you can scale back your services and thus your expenses. If you had instead hired an employee, you’d have to pay the same wage, even if economic times are tough.
Payroll and related taxes have a ton of rules and regulations that are often hard to keep track of. It’s easy to make errors — which can result in stressful and costly IRS trouble. Using payroll software can minimize these human errors thanks to automation and internal controls that ensure your information is correct.
Transferring payroll data from one system to another isn’t easy for many. Some payroll services charge for transferring payroll data to their system, but others will do all transfer and setup for free. If you want to save some cash and seamlessly transition to a new system, consider payroll setup and data transfer offerings.
Payroll and HR are closely connected. When looking for payroll software, it’s of great benefit to pick a service that brings in HR and recruiting features like job posting and employee onboarding.
There’s a good chance you use other software tools for different business functions. This commonly includes things like accounting systems and PoS software, and retirement account administration and management. If you can integrate these things with your payroll system, you can streamline your operations and save time.
Payroll laws are complicated, numerous, and change quite often. Violating these — even by accident — leads to costly problems. As such, it’s vital to pick a payroll service provider with tax experts on staff to keep up with updates. They’ll be able to update your payroll tax tables regularly and catch any tax compliance errors.
Again, payroll software for business can get confusing. It’s possible to run into problems with even the best software. A good payroll service will have strong customer support that you can reach in multiple ways. They should also have self-help resources like guides, videos, and blogs.
The Software-as-a-Service (SaaS) business model — which involves you paying a recurring fee for the software instead of downloading it to your computer — is taking over in many areas of business software and services, including payroll. Of course, the events of 2021 forced many companies to accelerate their adoption of cloud tech. Cloud payroll allows you to run payroll and view reports from anywhere you have an Internet connection.
Remote work is also impacting the makeup of the workforce in terms of employment status. People are shifting towards contracting and freelance work, as this type of arrangement allows for more freedom and flexibility in time and location. It also helps companies save money by hiring contractors (who don’t need to be paid a salary plus benefits) to fill partial roles. The payroll industry is adapting to this. Payroll software and services are being designed to help manage a more diverse workforce consisting of full-time, part-time, and contract workers.
Automation and AI are increasing efficiency in plenty of areas of business, including payroll companies. Some payroll services have AI that can automatically classify employees correctly for tax purposes. Automated payroll is also speeding things along. AI can be used in other areas, too. Companies can use AI to analyze large amounts of payroll data with relative ease and use these findings to inform business decision-making.
Any business beyond a solopreneur or extremely small (think less than 10 employees) company can benefit from payroll services. They save time and money, and they make compliance and taxes much more straightforward. That said, each payroll service has its strengths and weaknesses. Understand your business’s needs first, then look for the services that most closely address those needs.