Before the advent of payroll software, managing payroll was an arduous, time-consuming task with the potential for costly mistakes. The reliance on manual data entry and the risk of faulty records often resulted in late employee payments, causing significant inconvenience for workers and HR and payroll staff.

Although payroll systems were considered a premium or high-end convenience during their first iterations, they have since become acknowledged globally for their crucial role in ensuring payroll precision. Today, they are a necessity that ensures efficiency and accuracy.

What are common payroll system features?

  1. Integration capabilities:
  2. It is essential for payroll solutions to easily and effortlessly integrate into existing applications and services, given the diverse range of ecosystems most businesses have adopted in recent times. This simple integration ensures smooth data flow across systems, improving management efficiency and user experience without the need to juggle multiple platforms.

  3. Integration with time-tracking software:
  4. Payroll software can seamlessly integrate with time-tracking solutions or has built-in time-tracking functions. This is essential for businesses with hourly workers, as it simplifies the payroll process by eliminating the need to manually input hours worked, enhancing both efficiency and accuracy.

  5. Availability of direct deposit:
  6. Direct deposit is a critical feature for both existing employees and prospective hires, as it offers them immediate and convenient access to their earnings. For employers, it simplifies the payroll process by removing the necessity to print and distribute physical cheques.

  7. Customizable payroll reports:
  8. The capability to generate and customize payroll reports is essential for monitoring and analyzing payroll data. While standard reports provide quick insights, the ability to tailor reports enables businesses to gather data on specific metrics that are critical to their operations.

  9. Proactive payroll auditing and error detection:
  10. To mitigate costly payroll errors, advanced payroll systems offer functionalities that proactively identify irregularities, such as payments to terminated employees or duplicated payments. These systems also adjust for any mid-period changes, ensuring accurate compensation through prorated adjustments.

  11. Tax processing:
  12. Some payroll platforms feature integrated tax rate tables, which update automatically to reflect changes, simplifying the deduction process and making tax filing easier.

  13. Global payroll management:
  14. With remote work on the rise, businesses are increasingly hiring globally, necessitating payroll software that can handle the complexities of international employment. This includes managing different currencies and time zones, and complying with various laws and regulations, making global payroll capabilities a must-have for modern, forward-thinking businesses.

  15. Self-service options for employees:
  16. Employee self-service portals provide significant advantages, like enabling employees to update personal details independently and being able to access important information such as vacation accruals, pay stubs, and tax documents. This, in turn, allows HR to focus on strategic initiatives rather than administrative tasks.

Types of payroll software

Payroll software is available in a variety of configurations, customized for businesses of various sizes, financial capacities, and unique needs. Below are a few of the main categories of payroll software:

On-premise payroll software

This conventional software variant is installed on the organization's personal computers or servers. It enables complete management of payroll information and procedures and necessitates expertise from an internal IT team to ensure upkeep.

Cloud-based payroll software

Often referred to as Software as a Service (SaaS), this payroll software model is operated on the service provider's servers and is accessible over the internet. It allows for remote access, typically comes with automatic upgrades, and minimizes the need for an extensive IT setup.

Payroll capabilities within integrated HR systems

Such systems incorporate payroll operations within broader systems like human resources information systems. Integrating payroll in this manner can enhance the efficiency of HR tasks and ensure uniformity of information throughout the company.

Enterprise resource planning (ERP) software with payroll

ERP software packages come with payroll components as part of a larger collection of business administration applications. These are well-suited for large businesses that require seamless integration across finance, HR, sales, and other functions.

Benefits of using a payroll system

A payroll system provides several advantages, including:

  • Enhanced payroll procedure efficiency, that can lead to cost reductions.
  • Increased precision and promptness. Businesses not using a third-party solution may experience payroll errors.
  • Easier compliance with local regulations, updated tax rates, and laws for keeping records.
  • Improved access to vital information in an easily understandable and tailorable format, supporting better decision-making.
  • Facilitates business expansion. Scaling up necessitates the use of automation and artificial intelligence.
  • Any business employing workers or independent contractors stands to gain from comprehensive payroll software. Even a small enterprise with just one worker would find manual payroll handling to be cumbersome and prone to mistakes.

It is important to note that most payroll providers can tailor their offerings or have different products for businesses of different sizes. For instance, payroll software for small businesses may not necessarily benefit a medium to large business. And payroll for medium to large businesses may be too costly for smaller businesses. This awareness is important when selecting a payroll system.

How to choose the right payroll software for your business

Choosing the right payroll software is critical for a business to be able to run its payroll tasks smoothly. Below are some steps to consider when choosing payroll software:

  1. Determine what you need from payroll software
  2. Note specific business features such as the number of employees, how often payroll will be run (weekly, bi-weekly, monthly, etc.), the types of employees (full-time, part-time, contract), and any industry-specific payroll regulations. Next, identify key functionalities required such as wage calculations, tax filing, compliance tools, payroll analytics, etc.

  3. Set your budget
  4. Establish how much you are willing to spend – including initial set-up costs and recurring expenses like monthly fees and software updates. It can be helpful to weigh costs against benefits to determine if the benefits reaped from the investment would be worth the cost incurred.

  5. Assess the software's features and capabilities
  6. Consult online reviews including reviews on the top payroll software and the credibility of providers, compare costs, essential features, and unique selling propositions. Other things to consider beyond features include:

    • Feedback on ease of use from customers
    • The software's ability to scale and grow with the business
    • Compatibility with your existing systems for easy integration
    • Security measures and data privacy
    • Customer support ratings
    • Schedule demonstrations and set up time to speak with sales associates from a list of potential companies to learn more about the software and ask the right questions.
  7. Make your choice
  8. Based on evaluations, narrow down options to the ones that best meet your criteria and goals. Once the provider has been selected, work with them to implement the software and undergo the necessary training.

    Frequently asked questions

    How can ADP help businesses with payroll management?

    For over 75 years, businesses of all sizes - small and large - have relied on ADP for their payroll needs. Our cost-effective, adaptable services help companies conserve both time and resources with features like:

    • Calculation for wages and taxes
    • Self-service applications for employees
    • Varied payment methods including paycheque and direct deposit
    • Managing tax calculations and payments
    • Assistance with compliance and reporting obligations
    • Seamless compatibility with time tracking and HR software

    What is payroll workflow?

    Processing payroll entails rewarding employees for their efforts. This includes determining the overall salary earned, applying necessary deductions, completing payroll tax filings, and disbursing payments. While these tasks can be performed manually, employing a payroll system tends to be more precise and effective, and can assist in complying with multiple payroll standards.

    Learn More

    Are you looking for an easy-to-use, affordable payroll system? You can benefit from ADP's payroll solutions.

    Talk to us about your payroll challenges, and we'll walk you through our solutions — including how companies like yours use them. Call 866-622-8153 or start a quote.

    This guide is intended to be used as a starting point in analyzing payroll features and is not a comprehensive resource of requirements. It offers practical information concerning the subject matter and is provided with the understanding that ADP is not rendering legal or tax advice or other professional services.