Written by POS Expert Martin Nikolaev
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Your small or medium-sized organization can greatly benefit from utilizing the best payroll system for small businesses you can find, regardless of the industry you’re operating in. If you’re one of the business owners or managers who understand the perks of having a single system to manage salary payment, set up direct deposit, withhold taxes, and avoid fines, but struggle to find the right software solution and don’t know where to start, this article is for you. I’m convinced that all these tasks can be achieved with the help of the best small business payroll system that suits your needs to the fullest. I’m here to help you find it.
Don’t have time to read this whole review? Skip ahead to:
- What is the Purpose of Payroll Systems?
- What Can Payroll Systems Do for Your Business?
- How to Find the Best Small Business Payroll System? | Buyer’s Guide
- Gusto Payroll: Best Focus on HR Management
- OnPay: The Best for Small Businesses on a Budget
- Paychex: The Most Upgradeable System
- ADP: The Most Scalable Solution
- Rippling: The Payroll System with the Most Integrations
- QuickBooks: The Best All-in-One Payroll System
What is the Purpose of Payroll Systems?
Payroll processing is a simple, but important functionality that I’m sure you’ll love to have as part of your managerial arsenal. It administers the paychecks of your employees thanks to various filters and aspects, such as status, position, type, department, salary amount, deductions, benefits, bonuses, and so forth.
The best small business payroll system for your organization will also take care of filing reports and handling taxes related to employment. The features of quality payroll software are irreplaceable. They can be handled manually, of course, but it’s a painstaking process prone to errors. There are too many factors involved, which is why I suggest you invest in the best online payroll system you could find. Using the tips below, I’m sure you’ll be able to pick the right solution for your business.
It’s estimated that currently, 25% of businesses are still using pen and paper for their payroll. I believe that using this method of keeping payroll can be dangerous in the business world today due to the ever-changing compliance laws, tax regulations, employee benefit rules, and government integration with businesses. Whatever industry your business is in, accuracy is key. Proper record-keeping and document collection can make the difference between getting employees paid on time and paying huge fines for improper tax filing.
Types of Payroll Systems to Choose From
It’s important to be able to recognize the type of payroll system that would suit your company the most. This is the first step in your research process, but I’ve made it easy for you. Read below to learn what types of payroll systems exist and how they compare to your expectations.
Free Payroll Software: Obviously, free software can never be feature-rich, but free payroll software can be the perfect deal sometimes. Most free solutions in this sector feature PTO tracking, automated payroll, tax management, and more. The trouble is, any additional option will cost you, and there are often limitations to consider in advance, meaning that free payroll systems are not the solution you seek, at least in most cases.
Paid Payroll Systems: This is the common option for most businesses, and it’s typical for large-scale ones. There are dozens of payroll functions and automation included in most such products, not to mention the numerous extra benefits, such as further streamlining of several aspects, lower operational costs, etc.
In-House Payroll Systems: This is a good solution for small to mid-sized companies. The payroll software in this case is simple, intuitive, and easy to learn. A single employee can run the entire system, including the communication and problem-solving tasks. The trouble with this type of system is that its efficiency depends on that particular employee to a great extent. On the bright side, it’s a cheap option to pick.
Outsourced Payroll Systems: Some businesses rely on this solution, but it’s often a more expensive route to follow. When you leave a third-party contractor to deal with your payroll needs, you focus on the more important managerial tasks ahead of you. You won’t have any administrative problems to handle yourself, but the lack of control over things may cause issues at one point.
On-Premise Payroll Systems: This is the type of solution that requires you to host the software on your company servers. This is not troubling if you have a technical support department to maintain and update it. However, I think that, as a small business owner, you’ll find this to be too much of a challenge.
Cloud-Based Payroll Systems: I believe that this is the type of software to choose, period. The lower costs of running and maintaining such a solution go hand in hand with rich toolsets and loads of features. Cloud technology is secure and remote maintenance is available, which means lower costs and ease of operation, among the rest of the benefits mentioned above.
Automated Payroll Systems for Small Business Explained
Here’s one of the terms you’re likely to meet when you research the industry: payroll automation. I’m sure that the perks of automated payroll systems are something your organization could appreciate, but depending on the scale and scope it has, you might go without them. Still, it’s good to understand what payroll automation means and the perks it has.
Automated payroll can streamline payment processing even more through simplified and (you’ve guessed it) automated processes and tasks. This includes payroll reports, tax calculations and filing, direct deposits, and more.
Here’s what automated payroll software can do for your business:
- Payroll data tracking and updates
- Time tracking
- Tax reports and filing
- Document processing and changes
- Bonus and deductions calculation
- Financial analysis and planning
HR Payroll Systems | Definition
Some of the best small business payroll systems (such as Gusto and Rippling, both of which I’ll review in this article) have additional perks: they cover tasks that are usually handled by the HR team.
HR payroll systems combine the best of both worlds: HR and payroll. Such a platform is capable of making your team’s lives a lot easier. Sharing data between the two departments and combining some of the processes related to them results in increased efficiency and, what’s more important, higher accuracy. Such integration is always a good idea to have.
What Can Payroll Systems Do for Your Business?
Payroll software can do a lot for your business when it comes to money management. Online payroll systems can be operated in the cloud. They require no downloads and offer support for a variety of functions, such as those listed below. Find a payroll solution that provides all these services, as they are usually the basic ones for almost every business.
Tax Management: A good payroll service will calculate employee taxes, file quarterly reports, and even issue W-2 and 1099 forms annually. Making tax mistakes is the last thing your company might want, so taking human error out of the mix and leaving taxes to an effective system is in your company’s best interest.
Payment Options: Your new online payroll system could provide you with the means to pay salaries via different paths. You can choose to use direct deposits or stick to paper checks if you want to keep the paper trail of storing information on record. The payroll solution you choose could also organize employee payments to be transferred to pay cards, which is how they can access their funds immediately after receiving them.
Payroll Processing: Pay your employees accurately and on time. Rather than wasting your day with numbers, calculations, wage rates, overtime, taxes, and other painstaking tasks, all payments will be made directly to the employee by the method either they or you chose.
Time-Off: Get accessible updates on your employee’s vacation days and sick leave periods. Some services even process requests and approval, so that you can use that time focusing on other aspects of running your business.
New Hires: Make registering new employees a breeze with the help of the best online payroll system you could find. Such a system can report new hire information directly to the government for you, meaning one less thing for you and your business to handle.
Payroll Updates: Detailed reports about wages and your workforce can offer your company insightful details about management. Use that data to search for areas of improvement to grow your business.
Self-Service: Online-based payroll systems offer the added benefits of easy employee self-access. Rather than contact higher management to sift through financial documents, workers can check pay stubs, taxes, and other forms on their own.
What’s the Average Cost of Using Payroll Systems?
Money matters. And while it’s a good idea to think of a payroll system as a worthwhile investment, it’s also important to find an effective system that suits your budget and expectations. Payment plans differ between providers. Generally, payroll systems have a flat fee per month. However, others charge based on each payroll, others might offer unlimited access, even so, more might have different pricing plans for each level of service.
The bottom line is, base fees for payroll services generally are between $20 to $100, with many charging an additional $6 to $15 for each worker employed.
A payroll provider offering services for less might not be trustworthy, while one charging more should be researched with higher scrutiny to ensure their services fit the bill. Choose the payroll system that falls somewhere in between.
How to Find the Best Small Business Payroll System? | Buyer’s Guide
I’ve noticed that many business owners neglect most of the aspects they should look into and opt for either the cheapest option they could find or the top-rated one, regardless of the software tool or other product or service they invest in. Don’t make that mistake.
As a business owner, it’s so easy to get overwhelmed by everything that experts claim you MUST purchase in order to make your business more successful. It’s difficult to know what’s actually necessary, and what isn’t. The goal is simple: to find the best payroll system. It’s the one that meets both your company’s needs AND your preliminary set budget. It also needs to boast several key features.
Before you search for the best online payroll system for your company, you need to understand what features to search for in a potentially fitting software product. I understand it takes time and effort to research things, but this step is crucial.
Choosing a payroll system that doesn’t have all the features needed can cause poor money management and inefficiency, so your money would be down the drain.
To prevent this from happening, I’ll introduce all the must-have features to look for when you’re searching for the best small business payroll system.
Usability: It doesn’t matter if a system has all the best features available or if it’s the top-rated one you could find — if the payroll system is too complex to use or lacks some features you’re looking to have, your company can never benefit from it. Finding an interface that is quick and simple to learn how to use is essential.
Price: Finding something within your budget is important for any business, but it’s essential for smaller businesses, where every investment must be carefully planned. Look for a system that suits your wallet, but also one that won’t skimp out on essential services.
Feature Toolset: A payroll service would be nothing without its features. Some systems offer additional services — at additional costs, of course — so carefully consider what features your business specifically needs. Check if the system you’re willing to invest in has features like payroll processing, tax filing, direct deposit options, HR add-ons, third-party software integrations, and more.
Brand Image: What reputation does the payroll company have? If there are a lot of negative reviews surrounding a system, avoid it at all costs. Social proof is always important, so don’t forget to research that. Companies with a great track record and mostly positive reviews can make it easier for you to decide.
Customer Support: A little help can go a long way, especially when it comes to important business processes. Finding the best online payroll system that provides reliable customer support in case of unexpected issues can be a lifesaver during tricky situations. Knowing that you will have a customer service representative a call away can be a big relief for many businesses. I can tell from personal experience that quality customer support is among the most undervalued aspects of any third-party supplied business tool.
Employee Access: Employee self-service is a huge benefit for a payroll service to offer. Letting your employees easily access essential information, such as year-end tax forms and digital pay stubs, can streamline tasks and simplify financial management.
Document Management: A fitting payroll system should be able to manage and process documents that are later stored in the cloud, meaning they will be just as easy to access as secure. These documents may vary, but always include compensation papers, reports, tax forms, and so forth.
Reporting Functionalities: All the data related to payroll should be processed and stored as handy reports that you could access whenever you want. Better still, your HR team and other departments can access it as well. It’s all in one place, instead of being scattered across different platforms and sources.
Overall, the process of choosing the best payroll system for small business needs to consider all these aspects. But it also needs to include a detailed analysis and assessment of the needs of your organization. Here are the questions to ask yourself and your employees:
- What features do you consider a must-have?
- How should the new payroll system compare to the one you’re replacing?
- What is the projected scale of your business in the short term?
- What are the employee benefits and needs that need to be taken care of?
- What is the budget you can spare for such an investment?
- What does the payroll system cost?
- Do you need to provide employees with self-service?
- Is new employment reporting to the relevant authorities a necessity?
There are a bunch of other questions similar to these, of course. It’s all relative and depends on your exact preferences. Still, you should always pay attention to the costs. Except for the subscription fees and onboarding costs, there are usually other expenses to consider, such as training costs, compliance fees, processing costs, etc.
What Are the Effects of Utilizing the Best Payroll System for Small Business?
All the features, functionalities, and perks of an online payroll system lead to dozens of benefits. I’ll mention the important ones.
Your Company Will Save Money – One of the biggest goals as a business owner is to lower costs and keep increasing profits all the time. The right payroll system can help with this. Analytical and financial errors are not only annoying; they can turn into big expenses. By choosing to use a payroll system, the process will be streamlined and automated, ensuring that any errors will be avoided.
You Will Save Your Employees’ Time – When running a business, owners are often divided between a million different tasks they need to tackle. I know how this feels. Payroll systems offer an all-in-one solution to compile your payroll data. This is important for both small businesses and large businesses alike. You’ve probably heard the saying“time is money”, and it’s especially true in the business world. Rather than dumping large amounts of time into managing payroll, choosing a system that will automate the process for you and give detailed reporting and calculations is the way better solution.
You will ensure Tax Compliance Is On Point – Tax laws and requirements are constantly changing. It can be really easy to miss a new regulation by accident, even when you’re trying your hardest to stay up to date with the latest changes. As a business owner, you are probably aware of the risk of an IRS audit and facing tax penalties. In recent years, the IRS imposed $6.4 billion just in penalties. By using a payroll system, you can avoid being subject to fines, and thanks to the system’s ability to pay your taxes accurately and timely.
You Will Enhance Your Business’ Flexibility – There are many unexpected scenarios that you, as a business owner, will inevitably face. One of the most recent gut kicks for businesses to endure was the COVID-19 pandemic. In one way or another, all businesses, large and small, were impacted by the economic crisis that hit with quarantine and stayed after for a while. A vigorous payroll system will enable you to keep up with detailed employee reporting and allow you to analyze your business performance and make changes easily and quickly to minimize damage in the long run.
With all this in mind, I’ll move on to introducing the payroll software providers I’ve chosen for comparison.
The Best Payroll Systems For Small Business Owners | Comparison Reviews & Pricing
After getting some background information about what features and pricing to look for in a payroll system, and what benefits a payroll system can provide, it’s time to look at 2022’s best payroll system options.
I thought about ranking the payroll software providers I chose to compare for the purposes of this guide, but they’re all great choices to make. Still, the winner from my point of view will be the one in the “golden middle”: Gusto. This automated HR payroll system has it all: time and attendance management, insights and reporting tools, a full-service payroll suite, employee benefits management, and loads more. It’s the best small business payroll system, but it would fit a mid-sized organization as well.
|Payroll System Vendor||Best Feature||Pricing|
|Gusto||Unlimited payroll runs||Starts at $40/per month|
|OnPay||Easy to use, free 30 day trial||Starts at $40/per month + $6 per employee|
|Paychex||Integrations with 3rd party software||On request|
|ADP||Scalable and customizable||On request|
|Rippling||3rd party app compatibility||On request|
|QuickBooks||Same day direct deposits||Starts at $37.50/per month|
Best Focus on HR Management: Gusto Payroll
If you’re looking to combine payroll services with HR management tools and automation, Gusto might be the best payroll platform for small businesses like yours (or a mid-sized one, for that matter). Plans are available in four different tiers to target different-sized organizations. After all, payroll strategies for small businesses and large corporations differ significantly. Gusto is fully automated and suitable for a wide variety of industries.
This software boasts an enviable price/quality ratio. It’s relatively affordable but feature-rich, meaning that it could be the one for you.
Unlimited payroll runs and PTO tracking
Payroll reports are featured in all plans
Automated tax filing and tracking
Integrations are not available with the basic plan
Gusto offers a tier-structured pricing plan. As the price goes up, so do the features. This is useful for smaller companies looking to save on budget while still accessing benefits. The Basic plan is $40 a month and $6 per employee a month. The Plus plan is $80 a month, and the cost per employee would be $12. The Premium plan’s pricing is quote-based. This plan includes dedicated support and a full HR suite of functionalities.
OnPay: The Best for Small Businesses on a Budget
As one of the payroll systems with the best price/quality ratio, OnPay provides companies with a variety of payroll features at a fraction of the cost most of its competitors would charge you. OnPay is easy to use, and it’s an ideal solution for small businesses on a budget. This payroll software even handles all federal, state, and local taxes. Setup is simple, even if you have zero experience with such software products. Once you implement OnPay, you’ll enjoy plenty of HR features, a range of filing options, and automated onboarding. All at an affordable price, which is not to be underestimated as an advantage.
No hidden taxes or fees whatsoever
Free 30-day trial
No automatic payroll submission
OnPay is a one-plan-fits-all type of payroll service. At $40 a month plus $6 per person, it’s not the cheapest payroll plan of them all, but I consider it to be one of the best picks in terms of value for money. It’s an overall great choice for small businesses in need of streamlining their HR and payroll tasks.
The Most Upgradeable System: Paychex
Paychex is a great all-around payroll system option that provides all the necessary basic features you might need. The Paychex Flex cloud-based payroll software solution offers a variety of benefits. It will file payroll taxes, get unlimited payroll runs, and integrate easily with existing programs, all of which are done using one easy-to-use interface. Upgrading options and custom field input also make Paychex unique in terms of small-business-centered payroll services.
Paychex’s reliable customer support is available even when you choose the lowest subscription plan. The various add-ons and extensions provide some flexibility, and it just might be the thing you need to have the perfect payroll system.
Read: Paychex vs QuickBooks Payroll: Which System is Right for You?
24/7 customer support
HR add-ons are available
Compatibility with-party software
Relatively expensive pricing plans
Paychex doesn’t offer prices straight away. You need to contact the sales team and determine the final price, based on your preferences and the available options.
The Most Scalable Solution: ADP Payroll
This is a payroll and HR system whose reputation precedes it. The ADP payroll system is both comprehensive and highly recognizable. It provides an extended range of services that suits even the fastest-growing companies or those with an already large number of employees. Even the lower-priced plans come with full-service payroll, direct deposit, and self-service portals for employees.
The ADP Payroll system is so packed with bells and whistles that you might not even use some of them at all, which doesn’t mean they’re in the way. On the contrary, they might become handy one day after you expand your organization. Still, you’d need to pay for them until then, despite the fact you’re not going to use them.
Highly scalable payroll software
Suitable for businesses of all sizes
Multiple customizations are possible
Somewhat unclear pricing plans
The information available for ADP’s pricing plans is scarce. If you’re interested in using the payroll system for your business, filling out a form to request a custom quest is a requirement. Results are based on the number of employees and the needs of the business. Possible ranges for a 10-person business might fall between $150 to $200 a month, but there is no guarantee that those rights might apply to your business. Checking rates directly with ADP is essential.
Get a free quote from ADP Payroll
The Payroll System with the Most Integrations: Rippling
Despite the focus of this software provider being on HR, Rippling also offers high-quality payroll services to a range of companies as an add-on feature. Affordable, useful, and capable of robust app integration, Rippling is an excellent payroll system preferred by small businesses.
One of the best features of Rippling is its affordability. Many small businesses don’t have the spare budget available to spend just on payroll systems. Rippling offers affordable services with high-quality features. It’s also possible to pay employees anywhere in the world with Rippling and the payroll system pairs easily with hundreds of other apps. Syncing data is easy, fast, and reliable.
Affordable software pricing plans
Compatibility with hundreds of third-party apps
Relatively complex initial setup
Just like ADP, you’ll need to request a custom quote from Rippling in order to figure out the monthly cost of your desired service package. Company size plays a big part in that potential cost. One thing is for sure: regardless of the fee this provider will quote you, the price starts at $8 per employee per month.
Get a free quote from Rippling
The All-in-One Payroll Software: Intuit Payroll System (QuickBooks)
QuickBooks is one of the most popular names in the world of business aid. Its accounting software solution is amazing, but the payroll system offered by Intuit is equal in terms of quality and affordability. The software features everything you could possibly need, including automated payroll tax deductions and payments, unlimited pay runs, tax reporting, etc. The health support and HR support are handled by trusted third-party providers.
The same-day direct deposits and the unique tax penalty protection functionality are part of the reasons why the Intuit payroll system is like no other when it comes to having specific features.
Read: QuickBooks for Restaurants: The Complete Guide
Unlimited and automatic payroll
Seamless integration with QuickBooks Accounting
Fast direct deposits
Only the premium subscription plans feature time tracking and local tax filings
QuickBooks Payroll comes with three subscription plans: Core, Core + Essentials, and Premium, priced at $37.50, $50, and $80 respectively.
Get a free quote from QuickBooks
Owning and operating a business is overwhelming in itself, but choosing the right payroll system doesn’t have to be. In fact, it should be a simple process to make life as a business owner just a bit easier. Utilizing a system in your business can help overcome the challenges that are constantly being thrown your way and ensure that your business comes out thriving on the other side.
After inspecting the top payroll systems, try to reflect on the unique payroll needs of your business. Company size, payroll budget, and use of HR features are all important factors to consider when deciding on which payroll system works best for you. A solution that suits one company or industry won’t be a good fit for another.
Luckily, all the payroll systems on this list are among the best in the industry, so it’s hard to go wrong with choosing any of them. If this is your first time investing in a payroll system, I hope the buyer’s guide above will be enough to help you make the right choice.
Which payroll software is best for small business?
There are several trusted payroll software providers to choose from, but the best ones overall are Gusto, Paychex Flex, QuickBooks Payroll, OnPay, ADP, and Rippling. They all have their distinct advantages.
Is ADP good for small business payroll?
ADP payroll system is one of the best choices to make when you’re running a small business and need such software. The company provides 24/7 support and offers HR features as an addition.
Can you do payroll through QuickBooks?
The QuickBooks Payroll service is available on the QuickBooks Desktop bundle as a separate subscription.
Can I do my own payroll?
Some small business owners and managers still use Excel to do their organization’s payroll, but it’s a limiting way to do it, not to mention time-consuming. An automated, cloud-based payroll system can take care of such tasks in seconds.