A woman sits at a large white desk and looks at a flatscreen computer monitor that shows an invoice. Her hands rest on a calculator and a binder with pages separated by pastel-colored tabs. To the woman's left is a tablet showing a table filled with rows of numbers.
Payroll software comes in various sizes and price points. To find one that fits your company, consider what kinds of features and support you and your employees will require. — Getty Images/AndreyPopov

On a basic level, payroll software helps small business owners run payroll and comply with tax laws. It reduces errors by eliminating manual calculations and is less expensive than using a business payroll service.

The best payroll solutions support direct deposit, offer employee self-service portals and are user-friendly. That said, there are several things to consider before choosing payroll software, including customer support and affordability. If you’re ready to add payroll software to your tech stack, here are the essential things to look for in a payroll software provider.

Payroll software implementation and support

Many payroll providers offer a user-friendly startup wizard, importing capabilities and training guides. Look for payroll processing solutions providing written and video tutorials, including clear instructions for setting up your payroll system. In addition, check out customer service for phone, chat, email and help desk tools.

[Read more: Is Your Business Ready for Payroll Automation?]

Basic payroll services and features

Payroll software typically uses tiered subscription plans, with more features available at the upper end. Your must-have features will depend on your budget, number of employees and payroll complexity.

At a minimum, look for payroll software with the following features:

  • Direct deposit: This eliminates the need for paper checks. Examine payroll software to determine how long a direct deposit takes and the fees associated with the service.
  • Tax filing: A payroll system can collect, file and remit federal, state and local payroll taxes. Find out if the provider offers a guarantee for accuracy in deposits, calculations and tax filings.
  • Employee self-service portal: Give employees access to pay stubs and year-end tax forms. It should let workers view and edit their data, as well.
  • Reporting: Ensure you can filter reports in multiple ways and request examples to see what they look like. Standard summary reports include payroll, wages and taxes and tax liability.

You’ll want to look for the total cost of ownership (TCO), including expenses for implementation, employee training and administration.

Advanced payroll software options

Your small business may benefit from full-service payroll software and services or require solutions for different industries and employment types. Find the right payroll software for your business by asking questions about features, like:

  • Does the payroll software provide flexible employment options for contractors and employees?
  • Can it automatically report new hires to your state?
  • Are year-end W-2 and W-3 filings included or available as an add-on feature?
  • Can you integrate with accounting tools or human resources (HR) software?
  • Will the payroll provider automatically update to account for the latest tax rules?
  • Does the software offer a time-tracking tool for reporting, approving and sending hours?
  • Do the online payroll services provide mobile access?

Payroll software affordability

Prices vary widely, and there are free payroll software options as well. However, you’ll want to look for the total cost of ownership (TCO), including expenses for implementation, employee training and administration.

Many payroll software providers charge a base fee per month and a per-employee fee. But, you may also pay fees for add-ons, such as:

  • Setup or customer support.
  • Year-end tax filing and forms.
  • W-2 printing, mailing and reporting.
  • Direct deposits.
  • Check signings.

Simplify your payroll process and ensure compliance by investing in the best payroll software for your business needs. Cloud-based payroll systems come with a mobile app, integrate HR software and time-tracking tools and prioritize ease of use. Need more tips? Check out How to Choose a Payroll App.

CO— aims to bring you inspiration from leading respected experts. However, before making any business decision, you should consult a professional who can advise you based on your individual situation.

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CO— is committed to helping you start, run and grow your small business. Learn more about the benefits of small business membership in the U.S. Chamber of Commerce.

Published September 27, 2021