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Selecting a payroll system isn't as cut and dry as it used to be. Over the years, service and software providers in the payroll space have grown and optimized their solutions for different business types, sizes, and industries. There's no more one-size-fits-all solution, so it may take some time and research, but you can typically find a perfect match for your company.
When Will You Need A Payroll Solution?
Generally, you will need to select a payroll system when you start a business and when your business is growing. Of course, there are other times you might be shopping for a solution— such as your current system isn't meeting your needs or there is a new one that performs better.
For a new business, you will need a solution lined up before you hire your first employee. Most likely, this will be a modest system that meets the minimum requirements. Luckily, that system doesn't have to be spreadsheets and handwritten checks anymore. Even online payroll providers offer basic packages designed for new businesses.
For a growing business, you will need a beefier system than basic payroll. The more people you employ, the more complex your payroll and HR processes get, like managing time-off policies, benefits, and labor law compliance. If you choose wisely in the beginning, you may not need a completely new system. Instead, you can most likely upgrade your plan with your current system to meet your company's growing needs.
Factors of Choosing A Payroll System
The main factors you need to consider when choosing a payroll system are:
Keep these four factors in mind while shopping your options to stay focused on what's most important in a compatible system.
The tips below will help you to select a payroll system that is cost-effective, user-friendly, compliant with labor laws, and provides excellent customer service.
1) Find A Match
The first step in choosing a payroll service is deciding what services you need. Note down all the payroll functions you will possibly need for the near future. Project your payroll needs till the end of the calendar year. Or the end of the fiscal year for your business. This exercise will help you determine the range of payroll services you will need over a realistic or foreseeable time frame.
Research your options. A payroll solution must meet or match your requirements at the bare minimum. The idea is to purchase one solution that will meet all your needs versus paying for incomplete services from several vendors. The perfect match will save you time and money in the long run.
2) Customizable Packages
Look for a payroll service that will let you customize a package for your needs. If a bundle of services matches your needs but includes costly services that you do not need, you will end up overpaying. Try a service that provides a basic payroll package that meets the needs of most small businesses with customizable add-on services.
A service that lets you add on or shred services without locking you into lengthy contracts is an excellent payroll solution to get started, so look out for affordable pay-as-you-go plans.
3) Scalability of Service
Do you have a growing business? Are you anticipating growth soon? Do you have a seasonal business that sees significant fluctuations in employee headcount from month to month? Then look for a payroll service that can provide scalable services.
For example, a growing business will most likely need more customer support. A company that is branching out into diverse locations will require a payroll service that will meet the payroll compliance needs of multiple jurisdictions. A growing business might also have a greater need for advanced on-demand reports. So choosing a payroll solution that provides customizable on-demand reports will be a sound option for a growing business.
A downsizing or seasonal will do well to pay for payroll services by employee headcount. For example, a payroll service that bills for a base cost plus a monthly fee per employee that they process.
4) Time and Cost Savings
An effective payroll solution should save you time and money over doing payroll in-house. For example, outsourcing payroll tasks should leave you with more time to focus on operating and growing your business. You can reduce labor costs by using a payroll service over hiring a dedicated payroll employee. Payroll solutions that streamline and automate as many payroll tasks as possible create both time and cost savings for your business in the long run.
One of the main benefits of using a payroll solution is that it reduces errors involved in computing payroll data. In-house data input errors can go unnoticed for long enough that they can result in fines and penalties for a business owner. Payroll solutions are intuitive in picking and highlighting errors before payroll is submitted. Clients are usually able to review payroll before payroll is submitted. Payroll solutions that can integrate with in-house systems containing raw payroll data efficiently minimize data input errors.
Check to see if the payroll solution you are considering is familiar with your industry. For example, if you own a restaurant, do other restaurants that process hourly pay and tips also use the payroll solution you consider?
Also, look for payroll solutions built for your company size. For example, a vendor that focuses on large corporations might not provide you with the level of customer support you need. Or they might not respond to your inquiries with timeliness because they prioritize their larger customers over you. Small businesses need to look for payroll solutions that understand their needs. For example, Symply provides customized payroll and HR solutions to small businesses with 1 to 100 employees.
6) User Friendly
The best type of payroll solution is a user-friendly one. The client or user should not have to be a payroll, HR, or accounting expert to navigate the payroll program. Inputting data, submitting payroll, and printing checks should be simple tasks.
A payroll program that guides its users through every step is the easiest to learn and implement for ongoing use. In addition, a payroll program built for use on mobile devices also makes life easy for entrepreneurs on the go.
Take advantage of free trial periods to test drive the programs you feel are good options for your business. This is the only way you can know for sure if a payroll program is easy to use or not. Most trustworthy vendors will likely offer a free trial period. A good payroll service also provides ongoing customer support to its clients.
7) Integration Capability
A payroll solution that can sync with time clocks, or in-house accounting/payroll programs, helps minimize errors in transmitting raw payroll data. Raw or unprocessed payroll data can be uploaded to the payroll solution automatically or manually with a few clicks. There is no need to re-enter raw data from time clocks or in-house payroll/accounting programs from scratch.
Another advantage of choosing a payroll solution that syncs or integrates with in-house employee-related programs is generating on-demand reports using the most up-to-date data.
Even if a payroll solution cannot sync with in-house employee-related programs, it still needs to provide on-demand reports. Generating tax and payroll-related reports should be quick, manageable tasks. The ability to customize reports and create templates/preset reports for future needs should be simple tasks in the reporting arena.
9) Security Features
Cybersecurity is an important topic in today's digitized world. Check to see what security measures a payroll solution comes with. For example, an SSL certificate minimizes the risk of compromising confidential data. Payroll information is precisely the type of data that hackers profit off from stealing.
Has the payroll vendor ever had issues with getting hacked? Have client information or payroll data ever been compromised? Sometimes one hacking incident is enough for the vendors to learn from. They tighten their security measures and never suffer from breaches again. Therefore, check to see if a potential vendor has ongoing security issues. It is not a good idea to use affordable services with ongoing security issues.
10) Storage and Accessibility
The ability to access data from a payroll service depends on how payroll data is stored. For example, accessing data from cloud storage is a quick and easy process.
Accessing data from local storage/location is a much slower process. This is because cloud-based storage is accessible from anywhere 24 hours a day. However, locally stored data can only be accessed from a particular location. For example, locally stored data is only available from your office location or the payroll office location when that office is open. Choosing a cloud-based payroll solution is preferable to storing data on your own or on local servers.
There is a tax benefit to using outside cloud-based storage over local storage of payroll data. For example, when you pay a vendor for cloud services, you can deduct the entire cost of that service as an operating cost during the year. This reduces your taxable income. However, if you purchase local data storage options, you can only slowly deduct your purchase/investment cost over the years.
11) Payroll Taxation
Deducting and transmitting payroll taxes from employee earnings is the responsibility of the employer. Besides that, every employee will pay a different proportion of their pay in taxes. Using an efficient payroll service to process payroll will take the stress of accurate tax computation away from you. An efficient payroll service will make these calculations and deduct payroll taxes by factoring in employee W-4 information and local payroll tax rates. Some payroll solutions can even file and submit payroll taxes on time for an additional fee.
Besides tax deductions, sometimes employers are required to garnish employee wages at the direction of local authorities. Therefore, the payroll solution you select must include the wage garnishment feature in their suite of offerings. As an employer, you cannot predict when you will have to garnish someone's wages. However, it is almost certain that you will have to perform this task at some point.
12) Compliance and Updates
Labor laws and minimum wage rates are always changing. If you employ workers in different localities, you will have to keep abreast of labor and wage laws across all those jurisdictions. Therefore, the payroll solution you choose must update its software program to reflect current labor laws. Remember that failure to comply with updated labor laws can result in stiff fines, penalties, and interest.
13) Additional Services
Payroll solutions do not stop at processing or configuring earnings, taxes, and garnishments. They can also assist with HR processes such as employee onboarding, employee self-service, and expert advice for an additional fee.
Consider if outsourcing HR processes such as dealing with new hire paperwork, I-9, and W-4 forms will save you time, money, and stress in the long run. Your payroll vendor can most likely automate most HR processes for you at a reasonable cost. Automation can drastically reduce the amount of paperwork you handle and store. So automation helps with the organization and decluttering of the office space.
Employee-self service can make taking care of simple administrative tasks convenient for both you and your employees. For example, when employees need to print their pay stubs, submit new W-4s or update their addresses, they should be able to without waiting for HR to process such requests. Employees are happier when they can access their pay and benefits information at their convenience. Employee self-service frees up small business owners to focus their time on growing and running their business instead of wasting their time printing pay stubs.
14) Reputation and Reviews
Check out the reputation and reviews of vendors before purchasing payroll solutions from them. Check with business owners who are in the same industry as you. See what payroll solutions are working effectively for them. Feedback from actual users will give you a good insight into what you need from your payroll service.
There are many things to consider before purchasing a payroll system for your business. A good payroll system saves you time and money, keeps your business compliant with labor laws, and provides you with ongoing support. A great payroll system checks all the boxes above and offers additional HR services to grow alongside your business.
Are you in the market for a new payroll system? Check out everything Symply has to offer. OR sign up for our free employee onboarding tool— hire employees faster with their paperwork complete before the first day and maintain your employees' information all in one place that you can access anywhere from the web.