How to Choose the Right Payroll Software for Your Business

Here's what to look for when you choose a payroll software platform for your small business.
Written by NerdWallet
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Edited by Amrita Jayakumar
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Written by Kathryn Aragon.

When your business’s payroll system is set up right, it’s actually a pleasure to use — not a burden. But for that to happen, your system should adapt to the unique need of your business and do the heavy lifting for you. That way, payroll takes minutes, not hours of your time.

So, how do you choose the payroll software that’s perfect for your business? Here are the criteria you need to think about when you make your selection.

Payroll software

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on QuickBooks' website

QuickBooks Payroll Plans start at $45 per month (base) and $4 per person per month. Read review.

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on Gusto's website

Gusto Payroll Plans start at $40 per month (base) and $6 per person per month. Read review.

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on OnPay's website

OnPay Payroll Plans start at $40 per month (base) and $6 per person per month. Read review.

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on Square's website

Square Payroll Plans start at $35 per month (base) and $5 per person per month. Read review.

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on ADP's website

RUN Powered by ADP Plans start at $79 per month (base) and $4 per person per month. Read review.

Wave Payroll Plans start at $20 per month (base) and $6 per person per month.

Providers may offer lower promotional pricing.

1. Is this system a fit for your business?

Your payroll software should adapt to the unique needs of your business. You should never have to make decisions based on what your software can do. Look for these features to ensure your final choice is right for you.

  • Specifically designed for small businesses. Every payroll software was designed for a specific size or type of business. Make sure you choose one that’s made for small- to medium-sized businesses.

  • Serves your geo-area. Wherever your business operates, you need a software that’s compliant in that area. Make sure your payroll software is designed for the specific areas where you do business: your city, state or province and the country you operate in. And if you have employees in both the US and Canada, you need a software that’s compliant in both countries.

  • Can scale with your business. As your business grows, your payroll software should grow with you. Choose one that’s flexible and scalable, so you can put your focus on growing your business, not setting up a new payroll system every few years.

  • Simple, transparent pricing. Make sure there are no extra fees or contracts. Ideally, you should be able to figure out what your costs will be today with your current number of employees, and future costs as your company grows. If not, you may find a lot of hidden fees once you’re signed up.

  • Customer service. Choose a software vendor that’s available to answer your questions and help you set up your new payroll software. Also, make sure there’s a knowledge base for quick reference when you need it.

2. Does it do what you need it to do?

The best payroll software does most of the heavy lifting for you. These are the features it needs to keep it running smoothly and worry-free.

  • Cloud-based software. Payroll is key to your business’s operations. A cloud-based software will allow you to access and update your system anytime, from any device. If the software also provides a mobile app, all the better. That way you and your employees can easily access your data whenever you need it.

  • Direct deposit. Eight out of 10 US workers are paid by direct deposit. It’s fast, convenient and reduces the possibility of fraud or lost checks. It also simplifies reconciliation and processing since the direct deposit statement gives you the total amount for each pay period.

  • Integrates to create an HR workflow. Your entire payroll stack should work together seamlessly, allowing you to schedule workers, track their time on the job, run payroll and reconcile your accounting — all without a hitch. Before settling on one payroll software, make sure you can create a smooth workflow by integrating it with the other tools you depend on.

  • Payment types. In addition to salaries, your payroll software needs to handle holiday pay, expense reimbursements, commissions, bonuses and other taxable benefits.

  • Tax compliance. One of the most complex and time-consuming aspects of payroll, sales tax compliance should be a key component of your payroll software. It should take care of tax deposits and e-filing of tax forms without you having to manually trigger them.

  • Stays compliant over time (without having to think about it). The best payroll software will automatically download and install updates as they are released. This is key to staying compliant, especially when rate tables change on a regular basis.

  • Salary structure. You may have some salaried employees, others who are hourly and still others who are a mix. Make sure your payroll software can handle all types of salary structures.

  • Deduction types. Every employee will choose a different mix of deductions — such as medical, dental, life insurance and retirement savings. Make sure you can specify all the deductions you offer, then assign them as applicable to your employees.

3. Will it save you time?

Payroll shouldn’t take hours of brain-numbing work. A good payroll software will save you time and effort — so you can get back to growing your business. Here are the time-saving features you need to look for.

  • Simple onboarding and termination of employees. Setting up new employees should be quick and intuitive. You should be able to enter the basic details of their employment within a few minutes. Ideally, this data should sync with the other tools in your payroll stack, so you only have to enter the information once.

  • Employee self-service. Employees shouldn’t have to check with you every time they want to review their paystubs or download a W-2. Your software should come with an app or online portal where employees can access their pay stubs, request time off or review their time on the job.

  • Contractor payments. In addition to paying employees, your payroll software should be able to pay recurring salaries to contractors. Make sure it can handle 1099s and issue paychecks with no withholding amounts. That way everyone’s salaries will be paid at once.

  • Off-cycle payroll. Sometimes you need to distribute bonuses or advances, perform final pay or make corrections. Before settling on any payroll software, verify it can handle your off-cycle payments too.

  • Set-it-and-forget-it functionality. If your payroll process doesn’t change much and could all but run itself, your software should make that possible. Auto-approve features will let you set it to run whether you’re in the office or taking a well-earned day of vacation.

A version of this article was first published on Fundera, a subsidiary of NerdWallet

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