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Daydreaming about a better way to run payroll? Maybe it’s because your current system doesn’t have the features your business needs. And if you’re just starting, you may not know exactly what features you’re looking for. Whether you’re tired of your current payroll system or are just starting, we’ve got the 11must-have features your payroll software should have below. Read on to learn:
  1. Payroll software overview
  2. Benefits of payroll software
  3. 11 Features your payroll software needs
  4. How to switch payroll software

» Payroll Software Overview

If you’re new to payroll software, you may wonder what it is and how it can save your business time. Payroll software is a system employers use to run payroll and pay employees. Unlike a manual payroll process, payroll software automatically calculates payroll taxes employees and employers owe. With most software solutions, you can also print payroll checks and pay employees via direct deposit. The software stores payroll records and make it easy to generate payroll reports. A full-service payroll system handles federal, state, and local tax deposits and filings. That way, employers don’t have to worry about sending withheld taxes to the IRS and state agencies (or worry about meeting deadlines)—the software does it for you. In short, payroll software is a way to automate the payroll process … which is just one of the many benefits of using it. 

» Benefits of Payroll Software 

Why do employers use payroll software? There are numerous benefits of automating your payroll process, such as saving time, avoiding payroll errors, and storing payroll records. 

1. Saving time:

Without software, you would need to manually calculate employee gross wages, taxes and deductions, and net wages. Not to mention, manually calculating taxes would require you to spend time going through IRS income tax withholding tables and plugging numbers into your calculator. Software turns a process that takes some employers hours to complete and lowers it to minutes. And if you opt for full-service payroll, you also save the time it would take you to file and deposit taxes.

2. Avoiding payroll errors:

Think about the work that goes into manual payroll calculations. Plugging numbers into a calculator. Finding federal income tax amounts from withholding tables. Remembering to multiply wages by time-and-a-half if an employee earns overtime pay. All of these steps leave room for payroll errors. But with software, you don’t need to worry about withholding the wrong amount from your employee’s wages or miscalculations (as long as you enter the correct hours worked into the software). 

3. Storing payroll records:

Efficient payroll record storage is essential for organization and security. After all, there’s a lot of personally identifiable information in there. With payroll software, your records are in one secure, organized location for easy access.

» 11 Features your payroll software needs

So—what are these must-have features you should keep an eye out for when getting new payroll software? We’ve whittled it down to the following 11 features.

1. Automatic tax updates

One of the first things to keep an eye out for when choosing software is automatic tax updates. After all, you want your software to save you as much time as possible. If you use cloud-based, or online, payroll, you can access your account through a web browser. And because the software is in the cloud, you typically get the bonus of enjoying automatic tax updates with new tax rates and laws, saving you the time it would take to track these changes yourself. On the other hand, you must download or install desktop software onto a computer. Not only are you tethered to running payroll on that device, but you also need to regularly check for and install software updates (e.g., new tax rates). 

2. Easy setup

Getting started with a new system is half the battle. And when you sign up for new payroll software, you need to add some business and employee information before you can run payroll.To set up payroll, you need business info—like your tax ID numbers, account numbers, and unique SUTA tax rate—handy. But because payroll is all about your employees, the work doesn’t end there. You also need employee information, such as:
  • Names
  • Social Security numbers
  • Addresses
  • Deduction and contribution details
  • Pay rates
  • Bank account information (if paying via direct deposit)
No matter what payroll system you choose, you need to add business and employee information. But here’s the “feature” that you should look out for that makes all the difference:
  • Easy setup: Easy setup can turn a time-consuming task into more of the cakewalk busy business owners need in their lives. To streamline setup, some payroll providers offer:
  • Free setup: You provide your information, and the company sets up your account for you.
  • Step-by-step help: The system is user-friendly and helps guide you through the process of entering your information.
  • Easy imports: You can upload information, such as employees, in bulk rather than manual individual entry.

Sure, easy setup isn’t an ongoing feature that you need as time goes on. But in the beginning, this feature can get you set up and ready to run payroll more quickly. Not to mention, easy setup and free setup may foreshadow the kind of user experience you can expect when you run payroll…

3. Direct deposit

How do you pay employees? If you use the ever-so-popular direct deposit, you need software that can support it. Most online payroll providers offer direct deposits. But before signing up with one, ask questions such as:
  • Is direct deposit free?
  • How long does it take?
  • Can I also use other payment options (e.g., paycheck)?
  • Are there expedited direct deposit options?
  • What happens if there’s a bank holiday?
If you’re on a budget (and let’s face it, who isn’t?!), do your research to find a provider that can offer free direct deposit. That way, you can cut out extra costs associated with direct deposit fees. 

4. Unlimited payrolls

What’s your pay frequency—do you run payroll weekly, biweekly, semimonthly, or monthly? When you sign up with some payroll software providers, your frequency could cost you. Why? Your cloud payroll provider may charge you per payroll run rather than a flat monthly fee. And that means you pay more if you pay employees weekly than if you pay employees monthly.But, not all providers charge per payroll run. Some payroll providers charge a flat fee and let you run unlimited payrolls. And, “unlimited payrolls” also means you won’t have hidden costs if you make a mistake and need to run an extra payroll. Before signing up for new software, look for buzzwords like “unlimited payrolls” or “unlimited payroll runs.” If you don’t see anything like this advertised, pay attention to the fine print—you may see something about “XYZ per payroll run.”

5. Employee Portal

An online employee portal gives employees access to paycheck, benefits, and other employment information, including:
  • Pay stubs 
  • Tax withholdings
  • Start date
  • Form W-2 
  • Employee handbook
Software with an employee portal can reduce the administrative headaches you might have. How so? Employees can generally change their personal information (e.g., address), update their withholding information, and view and print paystubs without bothering you.Check with potential payroll providers to see if they offer a free employee portal, or employee self-service (ESS) portal. If so, look into how difficult it is to set up and what kind of functionality it has. 

6. Customizable

Your business is unique. Shouldn’t your payroll be, too? Some payroll providers think so, which is why they offer ways to customize your payroll.Look for software that lets you customize things like hours, employee deductions, and company-paid contributions. You may also be able to set up repeating money types (e.g., car allowance) for faster and easier payroll each run.

7. Contractors on the payroll

OK, so you know the difference between employees and independent contractors is essential for legal compliance. But, that doesn’t mean you can’t pay contractors when you run payroll.If you hire contractors to do work for your business, you can streamline payments with software that lets you manage 1099 contractors on the payroll. This feature can pay contractors with direct deposit or paper checks, along with your employees. 

8. Integrations

On its own, payroll software automates and streamlines the process of paying employees. But, can it do more? Absolutely.Look for payroll systems that integrate seamlessly with other types of software or platforms. That way, you can further reduce manual data entry.Must-have integrations include:And when comparing software with integration capabilities, here’s another keyword to keep an eye out Free. Some software systems charge you to integrate with different companies. Others, on the other hand, let you enjoy free integration. 

9. Mobile friendly

The world’s gone mobile. Shouldn’t your software, too? If running payroll on the go is something you envision doing, look for mobile-friendly software. Some software systems require that you download an app to run payroll, while others are optimized for mobile. If you don’t want to waste storage space on your phone or tablet, look for software that’s mobile-friendly without an app.

10. Payroll reports

Using software to run payroll means you have all the data you need at your fingertips—with the right payroll reports, of course. So, what kind of payroll reports should you expect from your software?Look into whether a potential payroll provider offers reports like:
  • Payroll Register
  • Payroll details
  • Forms W-2 and W-3
  • Form 941 or 944
  • Tax collections, deposits, and filings (if using full-service payroll)
  • Tax liabilities are broken down per tax agency (if not using full-service payroll)

11. Free support

How important support to you? If you’re like 90% of customers, brand loyalty depends on the kind of support you receive. The type of support you receive from your payroll provider is no exception. Even if you’re using the most intuitive system in the world, things happen—which is why customer support is key to a well-rounded user experience. When researching companies, look into available support options and ask potential providers questions like:
  • Is support free?
  • How can I reach you? (e.g., chat, phone, email)
  • What are your support hours?
You can also check out reviews to see what kind of support-related experience other customers have had. 

» How to Switch Payroll Software

Found a new payroll software provider with the features your small business needs to succeed? Great! Your next step is taking the plunge and switching providers.You can generally sign up for a new payroll system at any time. But if you’re currently using another payroll system, you may decide to wait until year-end or quarter-end for a smoother transition. To set up payroll with a new software provider, you need to gather payroll information, such as:
  • Your Federal Employer Identification Number (FEIN)
  • State and local account information
  • Employee wage, tax, and deductions information
  • Pay stubs
  • Employee contact and identifying information 
  • Payroll reports
For a checklist of the information, you need to set up payroll with a new provider, check out this guide on switching payroll providers

Author BIO:

Rachel Blakely-Gray is Content Manager at Patriot Software, LLC, a provider of affordable online accounting software and payroll for small businesses. At Patriot, she enjoys providing actionable, growth-oriented information for small business owners.

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