A man is seated at a table in his restaurant working after hours on his laptop.
A payroll service can spare business owners time and frustration, but it's important to know what features are essential. — Getty Images/Westend61

Payroll software can save hours on payroll processes. Most services include unlimited payroll runs and your choice of automated tax filing or no-tax filing plans. To get the most out of your software, ensure your provider offers critical payroll system features, like a tax-filing guarantee. These tools (and assurances) can give you peace of mind and help your company complete accounting or tax season tasks. These are the 10 must-have tools to look for when choosing a payroll service.

1. Tax calculation and filing guarantee

The best payroll software systems offer no-penalty guarantees for their services. If the service incorrectly calculates your payroll taxes or makes an error when filing the paperwork, it will pay the interest due and associated penalties or fines. Sometimes, the payroll provider will work directly with the tax agency to solve the problem on your behalf.

[Read more: Choosing a Payroll App: 6 Main Considerations]

2. Accounting integrations

Employers must include payroll data in their general ledger. Manual entry can be time-consuming and error-prone. Accounting integrations can transfer information to your accounting program. However, most payroll systems only integrate with a handful of bookkeeping tools, like Intuit QuickBooks Online, Xero, and Wave.

3. Employee portal

Most small business payroll systems provide mobile apps or web portals for employees. At a minimum, it holds a few years of pay stubs and tax forms. Some solutions let staff check their paid time off balances and electronically sign new W-4 forms.

4. Direct deposit

According to the Getting Paid in America survey, the American Payroll Association reported that over 93% of respondents get paid via direct deposit. Therefore, your payroll service should provide this option. Read the fine print to ensure that you won’t incur additional fees.

[Read more: How to Choose a Payroll Service for Your Small Business]

5. Customer support

When something goes wrong with payroll, it affects your business's finances and your employees’ bank accounts. That’s why it’s vital to have access to customer service. Many payroll providers offer limited live support hours during weekdays on base plans. A few include evening and weekend hours, and 24/7 support typically comes with higher-priced tiers. Payroll services also have self-service centers with a knowledge base, tutorials, and frequently asked questions.

To get the most out of your software, ensure your provider offers critical payroll system features, like a tax-filing guarantee.

6. State new-hire reporting

Small businesses must file paperwork with their state for every new hire. Some payroll services take care of this for you. You submit the paperwork via the online portal, or, in some cases, your employee can onboard themselves and e-sign documents online. The payroll provider sends the information to the appropriate state.

7. Unlimited payroll runs

This payroll feature is common with most reputable providers. It allows you to run payroll as often as needed throughout the month. For instance, you may run payroll off-cycle to process a missed or incorrect payment or to cover bonuses. Learn how payroll works in our Online Payroll Software and Service: Guide for Beginners.

8. Tax forms

Payroll systems may provide cloud storage for I-9s and W-4s, allowing employers to store all tax documents digitally. When tax season rolls around, payroll providers offer different service levels. Some let you generate 1099s and W-2s online but charge extra for e-filing and mailing paper documents. Others autogenerate end-of-year tax forms and send them to government tax agencies and employees.

[Read more: 5 Types of Tax Forms Every Small Business Owner Should Know]

9. Insights and reporting

Look for the ability to view and export payroll data, like the amounts your business paid employees, the totals spent on taxes, and your staff’s tax withholding amounts. Some systems may show companywide, department, or individual time-off data. Advanced payroll programs have workforce costing reports. These analytics help employers to understand cost drivers and forecast future payroll and project expenses.

10. HR tools and add-ons

Payroll services often include basic human resources (HR) features. They may partner with third parties to offer benefits packages, like 401(k) accounts. Some can scale to complete HR solutions with built-in applicant tracking systems, advanced hiring tools, and background checks.

Built-in human resource tools can include the following:

  • Organization chart and employee directory.
  • Health, life, and disability insurance.
  • Retirement benefits packages.
  • Savings accounts.
  • Onboarding checklists and tools.
  • New hire offer templates.

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