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What Is Payroll Management Process? 5 Reasons to Use Payroll Software

Category: B2B News

Any business that has more than one employee must have a payroll system. Paying employees consistently and with no delays not only impacts their morale, but it also reflects the company’s financial stability. Moreover, it is a requirement for compliance with federal and state laws. While this is a complex process, having an efficient system helps streamline and centralize the payroll method. But first, let’s discuss what is payroll management process?

In essence, the payroll management process refers to the administration of an employee’s financial records which includes the salaries, wages, bonuses, deductions, and net pay. These records must be maintained and kept by the employer for federal requirements, especially when it pertains to payroll taxes such as Income Tax Withholding Records, Social Security (FICA) Records, and Federal Unemployment Tax (FUTA) Records.

In the U.S., the most common pay length period is every two weeks. A survey shows 36.5% of private companies give payments to their employees bi-weekly. It is followed closely by weekly payments with 32.4% of businesses. Establishing your payroll period is one of the fundamentals of managing your payroll system. This organizes the process and fosters consistency for your employees. It impacts your business with the following:

  1. Morale of employees. Late payrolls make employees question the business’ financial integrity. If they feel their job is not stable and secure, they may underperform which decreases the workforce productivity and quality of your organization. This factor also includes their net worth and total compensation with bonuses and benefits.
  2. Lower tax bills. Appropriately and consistently accomplished payroll minimizes state and federal taxes. On the other hand, doing it inaccurately can result in hefty fines. Hence, ensure the proper amount of FICA taxes is withheld from each payroll and secure your employees fill out their W-4 forms correctly.

No matter the size of the organization, managing the payroll system is crucial. Those with fewer employees can use a one-write system. New business owners who are not knowledgeable in the process may find the procedure challenging because of the various federal and state laws requirements that must be complied with. Hence, some businesses outsource their payroll services to ensure compliance with all applicable laws. Those who prefer to do it on their own, however, purchase an automated payroll system because it is cost-efficient and time-saving. For more information on what is the best payroll software for small business check out our detailed guide to top solutions.

A graph on the order of importance for HR software based on factors such as starting up, growth, and optimization. (Source: Wagepoint)

Payroll software is one of the first HR software solutions small business owners must implement for their growth as it covers the basics for future HR processes, according to a survey of software buyer interactions. Systems for “time and attendance” and “personal tracking” come next, respectively. Forty-two percent of payroll software buyers are SMEs with 1-50 employees as they understand the potential roadblocks it eliminates such as inaccurate paychecks and vexed tax authorities.

5 Reasons to Use a Payroll System

After discussing what is payroll management process, it’s important to look at solutions that help streamline it. Aside from outsourcing, a business can implement a payroll software to accomplish their payroll processes. This is to ensure compliance with legal and tax requirements and to simplify the method of paying employees. For more information on popular solutions check out our guide to top 20 payroll software for payroll service providers and accountants. The following are reasons to consider having a payroll software for your business:

  1. It is time-saving. One in every three businesses spends 80 hours on managing federal taxes including employment taxes. This is equivalent to two weeks’ worth of full-time work. Calculating the payroll may seem as straightforward as adding up a number of hours worked with the employee’s rate. However, taking into account factors such as vacation leaves, overtime, and benefits makes it complicated. Moreover, the federal taxes with its own requirements have to be applied in every payroll. While you still have to input specific variables, a payroll software automates and optimizes the entire process that saves a significant amount of time compared to manually doing all the calculations. Repeating payroll tasks are also saved in the system so you won’t have to create a new format again and again manually.
  2. It maintains payroll information. Federal, state, and local laws must be implemented when paying employees along with their compensation and deductions. This information must be kept for each employee for accuracy in computation. Many payroll packages have customizable payroll modules that maintain these data. It eliminates the need for consulting various data sources because all information is compiled in one place. They also offer features that optimize pay periods, the method of payment (such as direct deposit and manual checks, among others), benefit deductions, and the work requirements for employees. This allows owners and managers to create a system that optimizes auditing and guarantees the employees understand the company’s policies.
  3. It is cost-effective. Most payroll systems are cloud-based solutions hence you will only have to subscribe to the service in order to use it. Additionally, its upgrades are provided automatically in most cases. There is no need for investing in hardware such as servers and physical software packages. Without outsourcing or hiring more employees to handle the payroll management, it can save you money in the long run.
  4. It is secure. The security standards of a payroll software are solid. Employee data is kept confidential which can be implemented by ensuring tight controls. This means specific access codes and administrative rights are only provided to the appropriate users to gain entry in the system. Meanwhile, employees can also log in and track their hours, leave allowances, payroll deductions, fringe balances, and other benefits in their payroll profile. This boosts their morale and reduces the work of payroll administrators.
  5. It optimizes the process. Repeating payroll tasks lead to boredom and can result in human errors. Computers mitigate this issue and guarantee payment information is accurate. Moreover, these data are archived in the online database. If your computer breaks down you won’t risk losing all your data because you can still access it on other platforms as long as you have your login details. Business owners and managers get a graph financial data to help them with forecasting payroll expenses. This includes calculating potential salary increase and determining how it can impact your company’s financial status to make necessary adjustments.

If you’d like to learn more about how much do payroll companies charge check out our other guide on that topic.

Key Features of a Payroll Software

Here are some of the key features of a payroll software:

  • Automatic payrolls
  • Invoices and quotes
  • Tax forms
  • Reporting tools
  • Vendor and contractor payments
  • Integrations
  • Basic tax filing
  • Compliance
  • Employee access
  • Bank connections

Examples of Payroll Systems

If you are ready to try out some payroll software solutions after learning what is payroll management process, you may start looking at these leading products in the niche:

1. Gusto

Gusto dashboard

Gusto is an online solution that provides HR services catered to small businesses. It can support teams, manage benefits, run payroll, and more – all in one platform. The system also provides a hassle-free navigation experience for users by allowing them to easily retrieve valuable information such as W-2s and contact data. Furthermore, Gusto ensures compliance, can integrate with a wide array of third-party apps, and streamlines HR processes in general.


An award given to products our B2B experts find especially valuable for companies

Try out Gusto with their free trial

2. OnPay

OnPay dashboard

OnPay is one of the most cost-efficient and affordable solutions in this category because it allows you to handle an unlimited number of payroll runs for 1099 contract workers and W-2 employees per month. The system also eases the way you manage payroll taxes since it can automatically calculate your federal and state payroll taxes. The vendor is so confident in its product that they’ll take responsibility if it causes any errors in your tax filing.



Try out OnPay with their free trial


3. Patriot Software

Patriot Software dashboard

Patriot Software is another budget-friendly payroll system thanks to the two packages it offers: Basic and Full Service. The first one is ideal for small businesses and provides a simple 3-step process of running payroll. Tax-related processes, however, such as tax liabilities reports must be handled by themselves. The Full Service Payroll, on the other hand, will take care of all the payroll filings including local, state, and federal taxes.

Patriot Software

Patriot Software

Try out Patriot Software with their free trial


4. Sage 50cloud Payroll

Sage 50cloud dashboard

Sage 50cloud Payroll is for SMBs in the UK and offers more than just payroll-related services. It also features tools for automating various day-to-day tasks, providing insights, engaging with the workforces, and more. It’s also a part of, and can seamlessly integrate with, the widely-known Sage ecosystem solutions such as Sage Payments and Sage 5cloud Accounts. It’s also accessible through mobile devices like smartphones and tablets.

Sage 50cloud Payroll

Sage 50cloud Payroll

Try out Sage 50cloud Payroll with their free trial


5. Paycor

Paycor dashboard

More than just a payroll system, Paycor is an integrated HCM (Human Capital Management) solution. It offers tools for timekeeping, onboarding, tax compliance, recruiting, and more. The system provides a modern solution for practically all aspects of people management – right from recruitment process to nurturing your employees. This provides your company a single source of your workforce data which removes the need for switching between multiple applications.



Try out Paycor with their free trial

Louie Andre

By Louie Andre

B2B & SaaS market analyst and senior writer for FinancesOnline. He is most interested in project management solutions, believing all businesses are a work in progress. From pitch deck to exit strategy, he is no stranger to project business hiccups and essentials. He has been involved in a few internet startups including a digital route planner for a triple A affiliate. His advice to vendors and users alike? "Think of benefits, not features."

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