Providing compensation for employees is something that must be done by every company in every industry, no matter how large or small. Since payroll is something that has to be done accurately and regularly, it makes sense for companies to invest in a system that automates these processes.
Keeping Payroll In-House versus Outsourcing
In the past, many companies outsourced payroll to avoid hiring a full-time employee or decreasing productivity by delegating payroll to an existing employee. With increasingly easier to use payroll software options, though, companies are now able to keep payroll in-house without having to delegate many labor hours to the process. Using payroll software can help companies to retain more control over payroll processes while enjoying greater flexibility than when payroll is outsourced, so making changes when needed is easier.
Payroll Software Benefits
If payroll is being done manually, automating systems by investing in payroll software can help save labor dollars, eliminate errors, and avoid compliance issues. Processes can be completed in a fraction of the time, which frees employees up for activities that are more conducive to generating revenue. Having payroll software in place can also help to make it easier for a company to adapt and take on more employees as it grows.
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Calculating company taxes and understanding what reports to file can be confusing, missing deadlines for these items can garner hefty fines and penalties. Payroll software helps companies by providing information and reminders about compliance needs and can even inform companies about changes in tax laws and other regulations. Some payroll software can even be set up to automatically generate reports and file taxes.
What Does Payroll Software Do?
Payroll software stores and tracks company information about employee compensation and deductions. Each employee’s pay rate, pay type, and hours worked are stored in the system and used to calculate gross income.
Calculates Deductions and Net income
After the gross income has been determined, payroll software automatically calculates deductions such as federal, state, and local taxes, insurance, and retirement savings. Deduction amounts are automatically subtracted and a check is drawn or direct deposited into a specified bank account. Some payroll software solutions may also be configured to automatically add reimbursement for mileage, travel expenses, and other employee expenditures.
Prepares Tax Forms
Payroll software can automatically generate all tax forms that are needed by employees, contractors, and companies. Common tax forms that can be generated and printed or sent with the push of a button include W2s, W3s, 1099-MISC, and 1099s. Payroll software helps to relieve some of the stress at tax time.
Keeps Records Effortlessly
Keeping records with a manual system can be difficult and requires a lot of space for files and paperwork. Keeping records with payroll software is effortless and requires absolutely no physical space, as all files are stored electronically. Old files can also be accessed or deleted with the push of a button, so staying organized is simple.
Determine Company Needs
Not all payroll software is exactly the same, so company needs should be assessed before vendor information is researched and reviewed. Companies that are smaller and do not expect to grow rapidly may wish to invest in less expensive payroll software that is limited strictly to payroll functions. Companies that are large or are growing rapidly may wish to invest in payroll software systems that are integrated with other aspects of planning and human resources management, such as time and attendance software, onboarding functions, and scheduling.
Employee Self Service
While not generally needed for smaller companies, employee self service options can make life much easier for human resources managers in larger companies. With self service options, employees have access to personal information regarding pay history, deductions, hours worked, benefits, and time off requests. With self service options, employees can automatically request changes and review information instead of having to contact the human resources department.
Cloud Based Software
Cloud based software of all kinds is becoming increasingly common. Employers are seeing more benefits from being able to access information from remote locations and pay for “Software-as-a-service” on a monthly basis according to needs, as opposed to coming up with a large sum for a completely in-house solution. Cloud based payroll software solutions also provide automatic updates when tax and compliance laws change, whereas on-premise software will need to be manually updated.
Authored by: Dave Rietsema