What is Payroll Software?

Payroll software is a point solution that focuses on calculating and processing employee pay, generating tax forms, and benefits administration. However, payroll capabilities can also be rolled into larger human resources (HR) management software, ERP software, or accounting and budgeting software.

Using a payroll software centralizes the myriad payroll processes onto one platform and provides a variety of tools to make payroll functions more efficient and accurate. Ideally, payroll software will prevent human errors when calculating and administering payroll, as well as allow employees to self-service some functions to reduce administrative overhead.

Payroll Software Features & Capabilities

Most vendors offering payroll software include features such as:

Calculating employee pay
Automatically calculating deductions for withholdings (e.g. state and federal taxes, insurance and retirement contributions)
Direct deposit check processing
Printing checks for employees not enrolled in direct deposit
Generating tax forms
Integrating with external payroll vendors
Issuing off-cycle checks or on-demand payments
Maintaining payroll history for each employee
Administering benefit plans
Managing retirement plans
Payroll tracking and auditing
Modifying and revising employee salaries
Running payroll balance and calculation reports
Employee self-service

Payroll Software for Small Businesses vs. Enterprises

Smaller businesses often don’t need all the additional features, and heftier price tags, that come with HR, HCM, or ERP software suites. Some examples of payroll point solutions that are targeted for small businesses are Intuit Payroll, Gusto’s Payroll platform, and Paychex Flex.

In contrast, HR management software and HCM suites are usually geared towards large businesses and enterprises. HR and HCM packages typically include broader HR management functions, such as maintaining employee records, managing employee leave, and keeping track of company provided employee assets.

Payroll Software vs. Accounting Software

Similarly to HR management and HCM software, accounting software includes a wide array of functions including but extending beyond payroll capabilities. Accounting software is primarily a financial dashboard that records and updates a company’s financial transactions and information.

Some examples of accounting software that offer payroll capabilities include Wave, QuickBooks Online, and Priority AccountEdge.

In-House vs. Outsourced Payroll

Traditionally, outsourcing payroll services were the dominant model as companies saw this as a way to avoid hiring payroll administrators. Outsourcing is still common, but many companies now choose to conduct payroll in-house with either cloud-based or on-premise solutions.

However, modern payroll software is changing this bifurcated model and offering a third option - cloud-based semi-outsourced payroll software. This hybrid option allows the company to retain control over core payroll processes while outsourcing certain activities, such as calculating tax withholdings.

Payroll Software Deployment

Payroll programs have a few different deployment options, including more traditional on-premise solutions and cloud-based SaaS options. Currently, deployment trends are shifting from on-premise, or hosted, solutions to cloud-based applications that can be partially or fully outsourced.

Some vendors offering different deployment alternatives are:

On-premise & cloud-based HR/human capital management (HCM) software with payroll capabilities: SAP, Oracle, Kronos, ADP
Cloud-only HCM software with payroll capabilities: Ultimate Software, Workday, Ceridian
Cloud-only for small to mid-sized businesses: Trinet, Paychex, Patriot Software

Payroll Software Comparison

When comparing options to find the best payroll software for you, be sure to evaluate these factors:

Scope of each solution: Payroll capabilities can be found across a range of product sizes. The middle of the road solution would include all the necessary functions for calculating, processing, and administering payroll. Larger solutions will include additional non-payroll functions, like HR management or accounting. On the other end, there are some tools for specific payroll functions, like tax compliance. Holistically evaluate your financial software needs to ensure you purchase a product that can meet as many of your current and future needs as possible.
Customer support and service: According to TrustRadius reviews of payroll solutions, the quality and level of customer service that comes with the purchase is a significant strength, or weakness, of many payroll products. The quality of customer service is particularly important for navigating payroll’s changing regulatory landscapes and compliance requirements. Payroll vendors can help you adjust your processes and stay compliant, but not all products will be able to deliver this service.
Mobile Accessibility: Any payroll software should allow employees to access it through their phones. Your employees should be able to access their pay stubs, pay history, and self service personal information like direct deposit info. Consider the range of capabilities available to employees and administrators through products’ mobile applications, and any additional costs that may entail.

Pricing Information

Payroll point solutions have monthly, subscription-based fees and are generally less expensive than HRM, HCM, or ERP software packages. Prices for point solutions start at $10/month for self-service or basic packages and increase up to $100/month. Most vendors also offer a free trial of their products.

Suite software packages may have subscription fees or a one time license and installment fee. Monthly fees can range from $10 - $50 per employee. One-time fees can range upwards of $20,000, and future maintenance and upgrade costs may apply as well.

Deployment Types	Software as a Service (SaaS), Cloud, or Web-Based
Operating Systems	Unspecified
Mobile Application	No
Supported Countries	United States
Supported Languages	English, Spanish

Simple: A streamlined set of automatic payroll features and benefits integrations

$40/month + $6/mo per person

Plus: Comprehensive payroll, benefits, and HR tools for employers building a great place to work

$80/month + $12/mo per person

Premium: Scalable payroll and benefits, expert HR, and dedicated support for the complex needs of growing teams

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