Columns and Blogs

Technology Tip
Dave Pelland has extensive experience covering the business use of technology, networking and communications tools by companies of all sizes. Dave's editorial and corporate experience includes more than 10 years editing an electronic technology and communications industry newsletter for a global professional services firm.

The Advantages of Small Business Payroll Software and Services

The Advantages of Small Business Payroll Software and Services

Payroll is one of the most important, and complex, tasks a small business owner needs to perform. Payroll is critical in paying your team members correctly and meeting a variety of payroll-related federal, state and local compliance obligations.

Your company’s payroll goes beyond compensating employees for the work they perform on your company’s behalf — it also addresses a variety of taxes, commissions, and, in some instances, employee-specific deductions such as wage garnishments. There are a lot of moving pieces to maintaining an accurate payroll, with little room for error because payroll mistakes can lead to employee morale problems, turnover and potential regulatory fines.

Another common challenge for small business owners is the fact that payroll laws are evolving constantly at the federal, state, and local level. This requires staying current about the latest changes to your obligations as an employer, as well as changing tax rates.

Given the complexity, payroll is often one of the first functions that many business owners seek help with to carry out. Depending on the size of the company and its needs, this can include using cloud-based payroll software or turning over the function entirely to a dedicated payroll service provider.

Payroll Software

Payroll software runs the gamut from depending on a spreadsheet to adopting a cloud-based HR and employee management software suite. Using software to generate payroll runs can be an effective approach for owners of smaller companies may not need all of the services offered by a dedicated payroll provider.

Software can help you streamline the payroll process by taking care of important functions such as:

  • Automating payroll calculations based on time worked, overtime payments, commissions, taxes, withholding, and other important factors.
  • Deductions for insurance payments, retirement savings or other reasons.
  • Any pay raises or cuts during a reporting period.
  • Sick time or paid time off.

Payroll software tools can also help with governmental compliance, so it’s important to update your software on a consistent basis to ensure you’re meeting your current obligations.

Popular software programs include Quickbooks, Gusto, Zenefits and others.

Payroll Services

A step up from DIY payroll software is a dedicated payroll provider that lets you enter employee data online, with the service performing the necessary calculations and generating employee checks or scheduling direct deposits.

In addition to weekly, bi-weekly or semi-monthly paychecks, payroll providers can also handle important filings such as annual W-2 and 1099 forms, as well as regular filings with the appropriate labor departments and other agencies.

Some services also integrate with your financial management and employee scheduling tools to automate data transfers and reduce the amount of employee information you or a team member need to enter manually. This can be helpful, for instance, in tracking paid time off and accessing payroll funds in your bank account.

Using a dedicated payroll service can be especially helpful for companies with workers in more than one location, especially if those locations are in different states or cities. Because each jurisdiction will have its own tax rates and reporting requirements, managing payroll in more than one location can take away valuable time that can be applied to other aspects of running your company.


Read other technology articles