Payroll documents
Choosing a payroll service means understanding your employees' needs. — Getty Images/relif

The value of an efficient payroll system cannot be overstated. Payroll software and services allow companies to compensate their employees more accurately than traditional bookkeeping has. Like almost every other modern company function, payroll has transformed into a digitized and highly integrated piece of business’s ecosystems.

Though modern payroll software and services have ultimately improved employee compensation, business owners still have multiple factors to consider when searching for a payroll solution. These factors include the size of your company and whether payroll software or a cloud-based service better suits your needs.

This guide will help you navigate the landscape of payroll software and services by:

  1. Briefly detailing how payroll software and services work
  2. Discussing how to find and implement an in-house software solution
  3. Discussing how to outsource your payroll needs to an external service

How payroll software and services work

As previously mentioned, it can be difficult to find a payroll software or service that doesn’t digitize and integrate multiple business functions. Whether you want to set up an in-house payroll system or export that responsibility to another firm, payroll software and services offer several compelling advantages.

  • Ease of access. Most modern payroll software and services try to make themselves as easy to use as possible. Regardless of whether desktop software or a cloud-based service is being used, businesses will have access to an entire dashboard of payment functions. In addition to payroll, these suites may track everything from paid time off to when employees punch in.
  • Record keeping. Payroll software and services make finding employee records simple. Whether you need to check employees’ attendance or verify their sick day balances, calling up information in a digitized payroll system is much faster than digging around in a drawer.
  • Cost effectiveness. The more elaborate and multifunctional a payroll system gets, the more expensive it becomes. Basic software and services can be cost-effective payroll solutions.

Buying and installing payroll software

It can be advantageous to purchase payroll software instead of outsourcing that responsibility to an external service. For a start, you can leave payroll in the hands of trusted in-house teams who already know the ins and outs of your company. Additionally, using payroll software can be cheaper than hiring another firm to manage your books for you.

Here are a few other factors to consider if you want to shop for payroll software:

  • Cost. Many projects are limited by their bottom line — payroll software is, unfortunately, no exception. If you find a payroll software suite that meets your criteria, it never hurts to check if that software’s manufacturer offers a free demo. You may also want to verify if that software can be tailored to suit your business’s unique needs. Finally, reading user reviews and other information can help you make an informed purchasing decision.
  • Security. Payroll software ties a lot of sensitive information together, including your employees’ bank account numbers, routing numbers and the contents of your books. As such, it pays to find a payroll software that can protect your information from hackers, viruses and other threats. It’s always a good idea to look for payroll software that encrypts your information and keeps it safe from abuse.
  • Payment functions. These are the tools at the heart of your payroll software, and they vary depending on how your payment system works. How often do you pay your employees? Do you compensate your workers via direct deposit, or by other means? Do you need software that can automatically deduct taxes or add sales commissions? These are all questions to consider as you search for your ideal payroll software.
  • Auxiliary functions. Payroll software can be useful for much more than dispensing payment. In addition to compensation, many payroll software suites can track metrics like paid time off and tax deductions. Depending on how your company functions and what software you may already have in place (or not), it may be prudent to bear some of these functions in mind while you shop. Software programs that fluidly combine several functions into one suite are generally quite helpful.
  • Customer service. It’s never a bad idea to pick a software company that offers exceptional customer service. You can check user reviews for the most accurate information on whether a product you’re considering has effective technical support. If it does, that support may save you and your IT department a few headaches. If it doesn’t, it’s probably best to move on to another candidate.
  • Accessibility. This factor also ties into how well acquainted you and your employees are with technology. There are many payroll software suites that are both cheap and easy to use, though they may lack an extensive suite of options. Those extra bells and whistles might come standard with a high-end program, but that software will likely be priced to suit its suite. Either way, free demos and user reviews can be effective ways to assess payroll software’s accessibility.
  • Implementation. Introducing payroll software to your company isn’t always as simple as pressing the "install" button. Be vigilant about technical problems and backing your data up regularly. It can make all the difference if the computer hosting your payroll software suffers a serious problem.

Customer service can be even more important for a payroll service than for software.

Outsourcing to a payroll service

A payroll service is a company that manages your payroll on your behalf. Online payroll services can be more expensive than a suite of payroll software, but they’re far less vulnerable to software problems and offer more customization. Many of them also calculate additional metrics, like tax deductions, as a matter of course.

Here are some other details that you can keep handy while shopping for a payroll service:

  • Payment plans. Unlike payroll software, which typically costs a single amount, most payroll services charge monthly usage rates. These rates vary depending on the size of your company, how you pay your employees and what additional features you need. You might be able to get some idea of a service’s cost from its website, but because these programs vary from company to company, you’ll get better information by consulting directly with a sales representative.
  • Integration. Many companies need a payroll service that can integrate with their software ecosystem effectively. Do you have an existing suite of programs that demands careful integration? Does your company work in a heavily regulated vertical that might require sophisticated software? Picking a payroll service that can integrate with your company without skipping a beat can save you time and money.
  • Security. As with payroll software, security is a vital component of any payroll service. It can be helpful to check whether a payroll service you’re considering offers security measures like data encryption and firewalls. As always, reading user reviews is an effective means of assessing whether a payroll service can secure your data.
  • Timeliness. This may seem like a factor that doesn’t warrant explanation, but there’s more to a payroll service’s timeliness than handing out paychecks on time. In addition to distributing pay stubs, many of these services also handle filing payroll taxes. A late payroll tax submission can land you in legal trouble even if that tardiness is entirely the payroll service’s fault. Fortunately, you can avoid this and other problems by double-checking a payroll service’s timeliness.
  • Customer service. Customer service can be even more important for a payroll service than for software. A payroll service can’t be impeded by faulty office hardware, but it can be hampered by technical problems that crop up on its end. As such, it’s a good idea to go for a vendor that tackles problems quickly and offers thorough technical support to its clients. Reading user reviews is usually the best way to verify whether a payroll service is up to those tasks.
  • Ease of use. Many payroll services allow employees to clock in or access their payment information remotely. If you’d like your employees to be able to do the same, it may be helpful to consider a service that makes accessing those gateways easy. If you want your employees to also be able to call up information like attendance and vacation time, most payroll services will be happy to oblige. As previously mentioned, there are typically few to no features that payroll services aren’t willing to modify.
  • Implementation. Once you’ve found a payroll service that checks all of your boxes, it’s time to put pen to paper. You may want to check if the service you’ve selected offers a free trial before you sign anything. Once you’ve signed, it’s also a good idea to keep all of your agreement documentation handy and note how well the payroll service is following through. Reading these documents is also a great way to avoid hidden fees and other untoward surprises. Finally, keeping in regular contact with your payroll service is an effective means of ensuring that it’s delivering the solution that your business needs.

CO— does not review or recommend products or services. For more information on choosing the best online payroll services, visit our friends at

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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Published February 25, 2019