When you started your business, choosing online payroll for your small business probably wasn’t one of your most top-of-mind priorities. That is until you need to pay yourself or you hire your first employee. That’s when you quickly realize how much time it takes to run payroll manually. Perhaps this is why payroll is one of the first kinds of HR software that small businesses seek out.
Why Do You Need Payroll Software?
The first and most basic function that payroll software offers is that it automates your basic payroll calculations. If you have yourself on a basic salary, that may not seem like much. But, if you have hourly employees, that’s where it starts to get interesting.
Then there’s overtime, statutory (public holidays), vacation and other calculations. This is when you really start to appreciate payroll software. It helps save you time and prevent mistakes that happen as a result of manual data entry. (For help on the topics we just mentioned, see our list of quick links at the end of this post.)
“C” is for Compliance
Compliance is a second area where payroll software is incredibly helpful. Compliance is a serious-sounding word that the government and regulatory agencies use to refer to following all the tax rules that relate to payroll. (They like serious-sounding words, it’s just how they roll.) These rules include taking income tax and managing mandatory payroll taxes (employment taxes).
Employers have to withhold income tax and the employee’s portion of employment taxes at set rates, while also contributing the employers share. As a special bonus, employers also have to file routine employment tax reports and send these payments to the authorities on a regular basis. Payroll software helps automate these calculations and many providers will also forward your payments to the tax authorities on your behalf.
Where Do You Start When Comparing Payroll Software?
If you’re a small business owner or manager going it alone, you might start with basic online search. This may also lead you to software review sites like Capterra
, Software Advice
If you have an accountant or bookkeeper on your side, chances are they’ve used or heard about most of the top contenders. (They choose the option that fits each business best, which is why they may use more than one payroll company, depending on the business’ needs. This experience makes them an excellent first-hand resource.)
Your accountant or bookkeeper will also know your business and its unique payroll needs. In many cases, an accountants and bookkeepers are the ones making recommendations to the small business they serve.
Finally, in a perfect world, you’ll want to ensure that the payroll software you choose integrates with the accounting software you use. Think QuickBooks Online
. To find a payroll solution that integrates with your accounting software, you can go to the respective accounting software’s app store. Most online payroll software providers also list their integrations on their websites.
Are All Payroll Software Applications the Same?
Objectively, you can compare the functionality
of small business payroll apps on an apples-to-apples basis. Each payroll provider also has what they consider an ideal business size and number of employees.
Subjectively, you have to find the payroll provider that’s a fit in terms of how easy the software is to use (user experience or UX) and the level of customer service provided.
For example, as a small business payroll provider, Wagepoint
works hard to ensure that we give you all the tools you need to run your payroll. We also work equally as hard to ensure that our software is intuitive and easy-to-understand (think grandma could use it) and we pride ourselves in our hard-working and personable service team.
Ultimately, though, the deciding factor is you. You need to find the small business payroll software that’s right for you and your business.
Questions to Ask When Comparing Small Business Software
In truth, there are a lot of questions you can ask when evaluating small business payroll software. However, your search and ultimate choice will be more successful if you know your specific payroll needs and exactly what the payroll software offers to meet them.
What You Need to Know About Your Small Business Payroll
In order to find the right small business payroll software, you need to identify your business’ specific payroll requirements, such as:
Have you ever run payroll before?
If you haven’t you may also have to register your business and do a little legwork to get all the information you need to set up your account properly. You’ll also want to know what kind of help will be available and ensure that you feel welcomed and empowered by this support.
Are you currently using payroll software and looking to change?
There’s no rule saying you can’t change. But there are specific rules on what you need to do to manage this transition properly. For more information on this topic, see this recap
How often do you pay your employees?
Also known as payroll frequency this is most commonly weekly, bi-weekly, semi-monthly or monthly. Depending on the pricing structure, this will also determine how your processing fees are calculated.
Do you have employees, contractors or both?
If you have both, you’ll need software that allows for the differences in how payroll taxes are handled.
How many employees and contractors do you have?
Pricing often includes a fee per employee or contractor. Having this number handy will help you estimate your costs.
Do you have employees with multiple job titles and pay rates?
If so, you’ll need payroll software that has this ability.
Do you need to pay employees and contractors in Canada and the United States?
Again, this is a feature that you’ll need to verify with the software company.
Questions You Need to Ask Each Payroll Software Company
Choosing the right small business payroll software also means getting to know the provider and its business model. Questions to ask include:
What is your ideal customer?
Is there a specific number of employees that’s too large or too small? Or, do you specialize in specific industries or are there business types for which the software is not ideal?
How does your pricing work?
Make sure you understand how the numbers add up. This is also where knowing how often you pay your employees and how many people you have to pay comes in.
What do I need to get started?
The process of entering your information into payroll software is called on-boarding. In order to be prepared, you’ll need your business identification number(s), payroll tax information, company banking information, employee information including banking, etc.
In addition to what you need, find out if it’s self-serve or if there’ll be someone to help you along the way. Another thing to investigate is if you’ll have to go through a validation process
before you run your first payroll. If so, get the details so you know what to expect.
Will you forward my payroll taxes to the proper authorities?
If this is something you want, which most businesses do, make sure that it’s offered. Also, verify if there are any additional charges related to these services.
Do you offer an online employee portal?
An employee portal where employees can log in to access their payroll schedule, pay stubs, tax documents and other information is a convenient, paperless way to handle administration.
How do you handle support?
Email, phone or chat. Find out how and when support will be available when you need it.
Are there specific deadlines for processing and funding payroll?
There are a lot of steps to processing payroll. Once you’re familiar with the system, it becomes second nature. But, first, you need to know things like processing deadlines. For example, with Wagepoint, you have to approve your payroll a minimum of three (3) business days before the processing date.
Do you integrate with any time tracking or other related apps?
Time tracking applications are a natural fit with payroll, especially when you can connect your time tracking tool with your payroll software.
Do you prepare year-end tax documents, including employee tax documents?
In Canada, these are your T4 and T4As. In the United States, these are your W2s and 1099s. Each year, employers are required to send these to their employees by a set date. If your payroll software can do this for you, it’s a huge time-saver. It’s even better if they can provide these forms electronically to employees via an online employee portal. (Hint — we can!)
Helpful Links — Key Payroll Topics
Here are some of our most referenced payroll articles for Canada and the United States.
Canadian Payroll Basics
US Payroll Basics
🙏We’d like to thank the QBO Connector Group (Jennifer Bauldic and Esther Friedberg Karp ) for hosting a recent Payroll H2H that helped inspire and inform this post. The H2H was targeted at Canadian accounting and bookkeeping professionals using QuickBooks Online. However, a majority of the points made about choosing payroll software are universal. Click here to see the recording. 🙏
The advice we share on our blog and in our webinars is intended to be informational. It does not replace the expertise of working with accredited business professionals. While we respect all of our competitors in the small business payroll space, we think you should pick us. We can’t wait to meet you!