Payroll Software Trends
Payroll software is a management system that automates the process of employee payments and tax filing.
These processes may include tracking attendance and hours of work, wages, tax management, and so on. Handling payroll looks easy on the surface until a business starts reporting various tax deductions that they must get right or pay a penalty.
Employers must understand how to withhold taxes and remit them to the proper authorities. Businesses may also need to pay insurance premiums and fund retirement accounts of employees. Handling payroll can be stressful for a small organization, not to talk of large businesses.
Since businesses would pay penalties for filing taxes incorrectly or missing deadlines, they turn to payroll software solutions to eliminate these errors and automate their payroll tasks. The best payroll software would be one that perfectly matches the specific needs of a business. So instead of bothering with all the features available, an organization may want to consider a payroll software that has the right combination of features that solve their business needs.
Why use Payroll software?
Since payroll management is a repetitive process that requires accuracy all the time, it qualifies as a task that businesses can automate. Hence, payroll software saves businesses time by speeding up the payroll process and letting them focus on growing their businesses. Using the software reduces errors, and increases compliance with tax laws. Plus, they’re easy to use and offer users more flexibility than they will get with outsourced payroll or doing their payroll management manually.
You might save money if you handle payroll manually, but you’ll also waste time. Moreover, you will need to learn the laws that govern payroll and taxes for all the jurisdictions where you do business.
The software reduces the time you spend calculating your employee’s work hours, tax withholdings, and wages. All you have to do is input certain employee information that the software would use to make the necessary deductions, calculations, and even payments. You’ll get reminders of when to file specific tax reports and the software would automatically effect updates whenever there is a change in tax laws.
Who uses Payroll software?
Both large and small organizations use payroll software. However, small businesses that want to streamline their payroll processing are most likely interested in software solutions that are strictly for handling payroll. In companies with over 50 employees, the HR manager would need payroll software that handles attendance, time tracking, tax filing, direct deposit, and so on.
Large businesses would need more extensive features in their payroll software because they also deal with talent management and human capital management. So they want payroll software that can either handle everything or integrate well with other department-specific software.
Payroll managers and administrators
Payroll managers and administrators manage payroll administration for organizations, hence the dependence on payroll software. This role takes care of payroll related compliance and correctness in all activities relating to payroll management. Payroll executives take care of employee-related tax records, forms, and filing.
Payroll coordinators are responsible for employee payroll transactions, accounting, tracking, and reporting. They process payroll on time and without error, a task that they must rely on a payroll software to help them execute.
Moreover, payroll coordinators help with payroll deductions, tax filing, managing payroll insurance coverage, and calculations. Payroll coordinators ensure that employee benefits like child support, medicals, and reimbursements are honored. They keep employee records and update them when relevant.
Payroll accountants are responsible for preparing employee salary statements and issuing them their paycheck. This role controls daily deposits, credits cards, and checks related to managing payroll. Payroll accountants use payroll software to reconcile their accounts, track payroll activities, and keep records.
Use data from their organization’s payroll software to process wages and salaries to employees. They also answer employee questions and address any concerns around payroll activities.
Payroll software is not for businesses only, it also benefits non-profit organizations. Although they’re exempted from certain Federal Unemployment Tax Act (FUTA) and Federal Insurance Contributions Act (FICA) tax rules, they still have to account for some monetary compensation. An example is the volunteer compensation which is a taxable wage.
Payroll software helps organizations generate tax forms in only a few clicks. It’s not out of place to feel stressed during tax seasons because you have to provide tax forms for employees, companies, and contractors. However, the best payroll software would generate, send, or print common tax forms like the W-2, W-3, 1099, and 1099-MISC tax forms. Having employees in different geolocations with different tax rates become easy to manage with the best payroll software.
Payroll software helps you stay compliant with tax laws and other regulations by providing information and reminders. Calculating wages and filing tax reports can become tricky as your business grows. Plus, you attract penalties and fines when you miss deadlines for your reports. The best payroll software comes with regular updates to give you the most current information concerning changes in the laws and regulations that govern tax. Some payroll software generates the reports and file taxes, so all that’s left is to confirm and approve.
Payroll software stores employee records safely and automatically so that you don’t have to think about where to store or retrieve them. Handling payroll manually requires a high level of organization to manage paperwork or virtual folders on hard drives. You also need space for files. Imagine looking for old files in a big organization that dedicates an entire room for storing records. Whereas, the best payroll software uses electronic storage for your data. You can easily access files with the push of a button or a search box. So, being organized is effortless.
Payroll software saves businesses money and time. On paper, an organization might see that it is cheaper to manage payroll manually, but considering the money they would lose to errors and missing deadlines this solution becomes extremely valuable. Using payroll software would free up more time for you to face other things that will yield more profit. If your company is currently outsourcing payroll management to a third-party company, even better. The best payroll software would help you avoid miscommunication, save more money, and cut down the number of vendors involved.
The best Payroll software integrates seamlessly with other software or systems that you use to grow your business. In addition to handling payroll, the best payroll software has to perform several other HR-related functions. Albeit, if it handles payroll alone, it must be flexible and compatible with other financial or HR-related software that an organization uses. An example is an integration with time and attendance software to eliminate duplicate data entry. Plus when you onboard new employees, their data would automatically transfer to the payroll software
The best payroll software calculates insurance, tax, and retirement deductions and net income from an employee’s gross income. The software automatically deducts the necessary amounts and makes direct deposits to employee’s accounts or draw checks. You can program some payroll software to reimburse employees for expenditures that they incurred on the job.
The best payroll software saves the HR department’s time by eliminating payroll errors. Addressing errors that arise from payroll management is stressful and time-consuming. This software makes paying wages on time easy by reminding you of the best time to start processing payroll. So, it gives you a quick start, supplies you with the right documents, proper deductions, and pays employees on time.
Payroll software significantly improves efficiency in HR functions with an employee self-service portal. While this feature may not be useful for small companies, HR managers of large organizations would find it very helpful. It allows employees to access their personal information such as payment history, attendance, time off request, hours worked, benefits, deductions, and any other field(s) you choose to add. They can review, confirm, or request changes to the information without going to the HR department.
It’s only natural that you know your personal information by heart, so letting employees supply or edit theirs reduces the chances of error. If employees are not permitted to change a particular field, they can send messages to the appropriate authorities to make those changes.
The best payroll software would alert HR staff of any discrepancies, such as an alteration to the records. Ideally, this software has high ratings when it comes to security reviews, so you’re sure it safeguards against potential data breaches and information tampering. Once it detects entries that are different from the previously entered information, you’d get an alert in real-time. So, not only do you detect the error, but you can make corrections immediately.
The software vendor must have a comprehensive knowledge base and a responsive support system to answer your security questions. At best, they can assign a personal processor that is responsible for the proper working of your software.
Payroll software gives you full visibility of reports and history in case of a glitch. The best payroll software is less prone to errors, but that does not cancel the possibility of glitches. You want to have the ability to access information and manually make changes while waiting for an issue to be fixed.
Payroll software prevents errors due to misclassifications. As an organization grows, that growth increases its chances of making a profit but also increases the risks of error. If you enter a janitor as an executive or vice versa, then you’ll have an overpaid or underpaid staff. Or maybe you onboard a new employee, but the person never shows up at work. You’ll just keep paying this person till you detect the misclassification.
The best payroll software allows employees to swap shifts easily. And you can assign shifts with a simple drag and drop functionality. You also have full control and can view employee availability, pass any information, organize teams, all in real-time.
The best payroll software is cloud-based, which makes it easy to update as laws and regulations change. Cloud-based solutions are becoming increasingly popular, and payroll software is not left out. However, this is not to say that the on-premise payroll software has no pros. With payroll management happening on the cloud, you can access information from any location in real-time. Plus, tax and regulation laws trigger updates on the software, as opposed to manually updating an on-premise solution.
The cloud offers flexible features, easy setup, low capital outlay, almost zero maintenance, and readily available support. Albeit, you’re plugged into a monthly subscription cost, and you have no control over where your data is hosted. Whereas an on-premise payroll management system has no recurring cost, and your data stays with you. But, you need massive investments for servers, licensing, downtime for upgrades, and in-house professional assistance for maintenance
Q: What is payroll software?
A: Payroll software is an automation system that speeds up the processing of your employees' payments. It takes care of processes like attendance, time tracking, tax management, check printing, and direct deposit.
Q: What is the best payroll software?
A: As a business owner, you should know that selecting the cheapest option is not always cost-effective. Likewise, you should not expect that the best software is the one with the most features. The best payroll software for you is one that can handle your unique business needs, help you scale, and adapt to your changing needs. For instance, you want to choose payroll software that supports your payment method and periods,
Q: What are the differences between HR and Payroll software?
A: Payroll software automates the processes of staff payment by converting raw time data and gross pay into net pay. Here, The money has to reach the employees when due, but only when you’ve made statutory deductions. In most cases, small businesses use only payroll software to manage their employees. Whereas, HR software makes sure that the staff is made of the best people in their respective departments. The HR software automates the task of HR staff, such as organizing employee data, performance management, creating functional workflows, onboarding, and offboarding.
Payroll management can be an integrated or dedicated solution. Since processes in payroll, HR, and accounting overlap, you’ll often find payroll integrated as a part of HRM, Accounting software, or an extensive ERP system. In other cases, you can have it as a standalone dedicated payroll management app
Q: How often should I run payroll?
A: Your payment frequency would depend on laws that govern payroll, type of employees, and the cost of running payroll. Payment periods range from weekly, biweekly, bi-monthly to monthly. Whatever the case, the federal and state law requires that you pay your employees regularly. That means you have to choose a payment plan for each employee and stick to it. You can also find out if your state has any requirements for payment duration.
Q: Can I manage my own payroll?
A: Yes, you can manage your payroll on your own. If you already outsource your payroll to a third-party agency, then expect them to ask you to supply certain information about your employees. You will have to supply information like how much you pay them, the documents they have submitted, if they took time off, and so on. Not to mention that you’re likely going to do this neatly in hand-written forms. However, if you input the information yourself, you’ll end up saving both time and money.
Q: Which of my employee’s information do I need to collect for payroll calculations?
A: Before you start paying your employees, you need each person’s name, gender, national insurance or social security number (depending on your country), and date of birth. For tax code, if they have never filled a P45 or an IRS form, you will get them to fill a starter checklist. Albeit, if they joined you in the current tax year, they have to get it from their former employer. Whatever the case, when you enter these details in the payroll software, it’ll automatically fill their tax code.
You can use the flowchart or guides from HMRC or IRS (or the local tax authority in your country) to understand how to calculate your National Insurance, FUTA, or FICA.
Q: Does the software have to be cloud-based?
A: No, it does not have to be cloud-based. However, the best payroll software makes it easy for you to access your data from multiple sources. Plus, if you use the employee self-service, you want the ability to see things happen in real-time. This is why a cloud-based solution might be the best fit for your business or organization.
Q: Should I select a single solution payroll software?
A: The answer to this question lies in your organization’s structure. However, using separate platforms for Payroll and HR can cause delays or increase the possibilities of errors, which puts you at more risk. On the other hand, a single solution hosted on the cloud would deliver an effective benefit and save time. Plus, it’s a safer way to handle employee information as it cancels the need to transfer data between systems or rekeying of information.
In other words, the single-solution payroll software houses data for both payroll and HR in one database. Also, the information is immediately available to both departments.
Q: What should I look out for in payroll software?
A: Some payroll systems are not compatible with other systems, so you want to have a clear idea of what you want to do with the software. If the software isn’t part of your accounting software, ERP, HRM, or other large systems, it must easily integrate with them. So look out for compatibility with other software you already use, such as compliant payroll automation, time and attendance tracking, direct deposit, or e-transfer, and any other thing your business needs. You can request a demo for an on-premise software to get a feel of what you are about to purchase. If you opt for SaaS, vendors often grant a free trial for a while.
Another thing to consider is the total cost of ownership. Apart from monthly subscription and license fees, check out for hidden fees like additional charges for core features, setup fee, training fee, per-paycheck fee, per-user fee, and system upgrade. Also, look out for terms that glue you to paying for features that are useless to your business.
If the software does not help you stay compliant with tax laws, the aim of managing payroll is defeated. The ideal payroll software must support tax laws, local regulations, and social security requirements. That said, it must generate the tax reports, make the right deductions, and upgrade automatically with changing tax laws.
Q: What payroll software limitations should I know about?
A: Purchasing and maintaining payroll software is often expensive because apart from the subscription fees, they may have hidden fees. You may need to recruit and train other staff to manage the software, which is an added cost. Plus, you may have to pay for technical support if a glitch should occur. Sometimes, the use of payroll software might be limited to one device. So if the device goes bad for any reason, you need the most responsive support team to start using the software in a short time. Otherwise, it’s no different from when you didn’t have a payroll software.
You must constantly backup payroll data that you gather from present and past employees for a while. This period varies based on the statute that governs each data. So you have to make out time daily for the process.
Withholding errors may arise when your payroll software can’t tell the difference between regular withholding amounts and additional voluntary withholding amounts. If you already purchased the software, then you must account for it to avoid under-withholding
Q: What is the cost of using payroll software?
A: The vendor determines the cost of a particular payroll software based on several factors. Some vendors base their charges on the number of quotes or invoices, as is the case of accounting-integrated software. You may have to pay for some features separately, or each user of the software. Other costs that may apply to your payroll software could include monthly subscription, the software bundle, and one-time licensing. You might need to pay for regular upgrades to ensure that your payroll reports are accurate and compliant with the law.
Regardless of your frequency of paying wages or salaries, you can benefit from the automation features of a payroll software. Handling payment manually gives an illusion that you are saving money until you factor in the time you spend in the process. That time, if used for more productive activities like marketing, may earn you more money than you thought you saved.
Plus, manual payroll management is prone to errors or delays. These errors and mistakes can attract penalties that can result in more losses. Whereas you’ll get reminders, workflow automation, and the required documents for payroll management and compliance if you choose to rely on a payroll software. The best payroll software makes it easy for you to access other resources and support, and that is why they are usually cloud-hosted.
The features of the best Payroll software must address the HR needs of small businesses and integrate well with the HR systems of larger companies. An employee self-service portal reduces the workload for the HR staff and alerts him when figures don’t add up. Plus, no matter how big the company grows or how often employees swap shifts, you’ll not run into the problem of misclassification.