How does payroll software work?
You value your employees. They are your company's number one asset. But with employees comes payroll, and with payroll comes complexity and confusion.
You have to keep track of the wage of each employee, track employee hours worked, review timesheets, calculate compensation, calculate and remit tax deductions to the government, issue checks...direct deposits...or both, and then maintain all of that information for years to come.
That's a lot.
Luckily, you can invest in payroll software that will do all of this for you, automatically. Payroll software will save you time and money (and keep your employees happy through on-time pay-days).
But what is payroll software, why do business owners of all shapes and sizes use software for their payroll process, what are the benefits of using software for running payroll, and what are the features you should look for when selecting a payroll solutions provider? Let's dive into it.
What is payroll software?
Payroll software is a computer or cloud-based program that automates payroll processing. On top of processing payroll, payroll software can also help keep businesses in compliance with tax laws and regulations, as well as provide detailed pay-stub breakdowns to employees.
Why do business owners use payroll software?
You may be wondering why a business would invest in a computer program if they have internal human resources and accounting teams. Or maybe you have an external accountant that can process payroll on your behalf.
But the problem is, both of these options are dependent on humans, and humans make errors. And if there's any area of your business where errors should be mitigated against at all costs, it's payroll.
Why does this matter? If an error occurs in your payroll and the process becomes delayed, this results in an unhappy workforce, a drop in productivity, and potentially a reduction in the workforce (workers may decide to move to companies with a stable payroll history). At the same time, errors could lead to an underpayment of payroll taxes, resulting in fines, penalties, and interest.
Using an automated payroll processing software provides you with the security of knowing that your employees are paid without a hitch and that you are complying with government regulations, thus not incurring unnecessary penalties or fees.
What are the benefits of payroll software?
The benefits of payroll software are vast. In addition to ensuring on-time payment to employees and the government, payroll software also provides the following benefits to your business:
Labor Laws: States maintain laws around the fair and safe treatment of employees, from minimum wage and overtime mandates to the requirement to display labor law posters, to the process for terminating an employee. Not complying with these laws results in hefty fines, and, in some instances, jail time. If you operate in multiple states, you have to keep track of the applicability of each law, in each state, to each employee. Payroll software helps you reduce this compliance burden by providing all the information you need in one location.
Federal and State Tax Laws: Both states and the federal government require employers to withhold various income and payroll taxes from an employee's paycheck, including Social Security, Medicare, and federal, state, and city income tax (where applicable). Payroll software automatically calculates and deducts then remits the withheld taxes to the relevant institutions.
Time: After the initial set-up of payroll software, your payroll system becomes automated. No more time-consuming manual calculations, giving you more time to focus on your customers and long-term strategy.
Cost-Effective: The average cost of an in-house payroll specialist is $40,000 a year. The average annual cost of generic payroll software averages around $3,000.
Accessibility: Most payroll software is available on the cloud and provides self-service portals to employees, so you and your employees can view and update the data wherever you are.
Keep Learning: What does HR software do?
What features should you look for in payroll software?
If you're considering investing in payroll software, it's important to carefully think through features your company requires. To get you started on this, we've compiled an extensive list of features for you to consider:
Tax Penalty Protection: The majority of payroll software providers have a 100% guarantee that your payroll taxes will be accurate, and if there is an error, the provider will pay penalties, not you.
Multiple Payment Modes: You may offer multiple pay-out modalities to your employees, from tangible checks, to direct deposit to an employee's bank account, to pre-paid debit cards. If so, you'll want your payroll software to support all of the above, for free.
Automatic Payroll Tax Filing: Automatic filing ensures compliance with regulations and avoidance of fines without any additional work on your end.
Overtime Pay Calculation: If you have employees that work overtime, you will want a system that supports calculating wage exceptions accurately without needing manual inputs.
Wage Garnishment Capabilities: Some of your employees may be subject to wage garnishment. This being said, you'll want a payroll program that automatically deducts the determined amount before payout.
Self-Service Portal: Come tax season or compensation adjustments, employees will want easy access to their compensation information, from gross income to net pay.
Integration Capabilities: If you are hoping to further automate payroll by automating all related accounting entries, look for payroll software that has prebuilt integrations with your existing accounting system.
What are the signs that you need payroll software?
If you're still on the fence about whether your business needs payroll software, review your current situation against the following checklist.
Are you the owner of a growing small business?
Have you noticed an increase in employees asking questions about the details of their paychecks?
Are you late on taxes or struggling to keep with manually filling out tax forms?
Are you falling behind on other business requirements because your resources are stuck manually calculating payroll?
Are you frequently delayed in issuing paychecks?
Is updating payroll calculations to reflect an employee's hourly wage or salary cumbersome?
If you answered yes to any of the above, you likely need payroll software.
Get started with payroll software today.
At Teamworks Group, we help companies all across the country automate and improve their payroll and account tasks with customized payroll software. Complete with a self-service portal and expert payroll support, the Teamworks payroll solution can be perfectly suited to your unique business needs.
Reach out to our team online or give us a call today to request a free quote.