Payroll Software Defined
Payroll software is a type of software that assists with compensating employees for time worked. This software can be purchased through a HR software vendor or can be included as part of a HR software package as a module within a comprehensive system.
Basically, payroll software helps with calculating paychecks from hours logged in time and attendance tracking systems. The software then draws paychecks or direct deposits funds into employees’ accounts. Taxes and deductions are also calculated and withheld by payroll software.
Why Acquire Payroll Software?
Providing compensation is something that must be done by any company with employees in every industry, no matter how large or small the company. 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. Payroll software can help to mitigate errors and improve compliance while saving time.
Keeping Payroll In-House versus Outsourcing
In the past, outsourcing payroll was seen as a way to avoid hiring a full-time employee or decreasing productivity by delegating payroll to an existing employee. Many companies still outsource payroll, but using payroll software is now an alternative to either of these options that many prefer.
With increasingly easier to use payroll software options, 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 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.
Shifting payroll from a third-party outsourcing situation to using payroll software can save money, eliminate the potential for miscommunications regarding payroll, and minimize the number of vendors that it is necessary to interact with regularly. If a payroll solution is part of a comprehensive HR software system, processes will be streamlined and it may be easier to cross reference information for decision making purposes.
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. The software is updated regularly so companies always have the most current information regarding changes in tax laws and other regulations. Some software can be set up to automatically generate reports and file taxes, so managers and employers simply have to submit approval before finalizing.
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. It is also important to consider how many employees a payroll software solution can handle and factor potential growth.
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. Employees can also keep better track of their hours versus pay using self-service, which may help with spotting errors.
Cloud Based Software
Cloud based software of all kinds is becoming increasingly common and payroll software is no exception. Employers are seeing benefits from being able to access information from remote locations and pay for “Software-as-a-service” or SaaS 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. This can save time on both research and technical updates, while continuously ensuring that managers and employers have access to needed information.