Last updated on March 12th, 2019 at 08:58 am
Everyone looks forward to payday. But for the payroll administrator, it can be a nightmare.
If you’re a small business, the many moving parts of payroll can seem a daunting task.
Producing checks and direct deposits, making sure taxes, benefits, and other withholdings are calculated correctly as well as submitting taxes and filings on time.
One of the most complex elements of accounting systems, it’s no wonder it seems easier to hire someone else to do it.
Is your small business growing and producing payroll manually is no longer a good option for you? Are you just starting out and getting ready for your first payroll run?
Wherever you fall in the mix, finding the right solution for your business is essential. Below we offer five questions to ask when choosing a payroll solution.
Our Top Payroll Solutions Pick for Small Business: Gusto
Our top pick for small business is an all-in-one HR and payroll software like Gusto.
As one of the most robust options, it can be used when you’re just starting out with a staff of about ten employees, and as you grow.
Not only does it take away much of the headache of payroll, but offers additional services to ensure you meet compliance regulations.
Also, it helps to ensure your employees are paid on time. Even if you only employee independent contractors, its pricing options can’t be beat.
A Comparison of the 5 Primary Payroll Solutions
For an at-a-glance overview of your options and what they entail, below is a comparison of the 5 primary solutions.
Choosing the best one for your business depends on a number of factors such as:
- How many employees you have, how they’re paid, and where they’re located.
- Whether you offer benefits and what other services or software you’ll need to integrate such as expense management or time tracking.
- Whether you have dedicated staff to manage payroll or if you’ll be handling it yourself.
- Your budget.
Best Payroll Solutions: Provider Overview
Compliance must be done on your own.
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Before Picking a Payroll Solution Here are 5 Question to Ask
When determining the best payroll solution for your business, there are five questions you should ask yourself.
These include information about the basic demographics of your business as well as your employee base.
Though you don’t need to know exact details or numbers, you may want to think about the future of your business.
If you plan to change your business model in the future, you may want to think about your employee base and whether or not your location will change.
Whether your business model will remain the same indefinitely, or if you plan to change some things, below are a few questions to help you choose the best option.
How Many Employees Do You Have?
If you have less than 5 employees, it might be easier just to talk to your accountant.
Ask if he or she would be willing to include your payroll into their monthly services for free.
On the other hand, if you have, say, 20 or more employees, you may want to consider software options.
Multiple paper checks and manual entry could mean trouble, especially when you have to work with taxes, withholdings, and benefits.
Below are a few guidelines:
- 0-5 employees—if you have 5 employees or less, you have very little regulation because you’re considered a very small business. If this is your employee base size, you won’t have to worry too much about compliance issues either. Any of the options would work for you.
However, as we mentioned above, one solid option is asking your accountant to roll you into their monthly services for free. You could also partner with your bank. If you do choose to use the accountant or bank option, keep in mind, you’ll have to have worker’s compensation insurance and file the right paperwork with the state.
- 6-50 employees—if you have up to 50 employees, you’re a considered small business. In this case, you may have to consider certain state level requirements such as sick leave. All-in-one HR and payroll software like Gusto can help keep you compliant.
- 50-100 employees—up to a 100 employees, while growing, you’re still considered a small business. With this number of employees, you’ll need a payroll solution that can keep you compliant at both the state and federal level. This includes the Family and Medical Leave Act (FMLA). A payroll software or service or all-in-one HR and payroll service are best.
- 100+ employees—if you have 100 or more employees, you’re no longer considered a small business. You’re now moving into the realm of a medium-sized business.
With this many people working for you, you’ll have to find a solution to that can make sure you comply with state and federal laws, benefits, withholdings, and tax filings. In this case, an all-in-one HR software is a must.
Where are you located?
In what city and state do you conduct business? Do you have multiple locations or just one?
Are all of your employees in-house or do you have remote employees? If you have remote employees, do they live in your area, elsewhere, or are they overseas?
Because you need to know what your federal, state, and city regulations are for sick leave, PTO, taxes, and so on, location is important. If you have:
- Just one location or if all your locations are in the same state—you can choose from any of the options on our list and feel confident you’ve made a good decision.
- Multiple/International locations/Remote Employees—this might be a bit more difficult as you’ll be required to meet more regulations. Not only will you have to deal with federal, state, and city requirements, but also any international regulations in regard to those cities, countries, or provinces. In this case, opting for all-in-one HR/payroll software may be best.
How are your employees paid? Are they hourly, salaried (or a combination)?
How you pay your employees should also be considered when determining a payroll solution.
If your employees are:
- All hourly—you’ll want to consider a time tracking feature in your payroll software. If you choose an option that can integrate time and attendance software or time-tracking software, you’ll do best with an option such as Gusto or Zenefits.
- All salary—if you have less than 5 salaried employees, then you may just want to consider asking your accountant to roll them into his or her monthly services. However, if you 5 or more employees, then it may best to consider investing in your own accounting software such as Quickbooks or HR software.
- A combination (hourly and salary)—combination payments may be a bit tricky depending on when you pay your hourly versus your salaried employees. In this case, you’ll want to consider a solution that gives you the ability to pay both sets of employees. Gusto, an all-in-one HR solution is most likely the best option here.
When do your employees work? Are they full time or part time? Maybe Independent Contractors? Or, are they a mix of all three?
Payroll solutions for mostly part time or full time employees is the simplest as you’ll have to consider standard issues such as tax reporting.
However, if you use remote or independent contractors, also called “1099 employees”, you’ll want to find a solution that can pay them without an additional fee.
Does your business offer benefits (or will it in the future)?
Offering benefits may complicate payroll a bit as you’ll have to know how to calculate the deductions.
If you want to include benefits in the future or if you already offer them and are looking for a good payroll solution, Gusto offers benefits as an additional service.
While the above five questions, can help you find the best payroll solution. You should also consider what is involved in setting up payroll.
This may also help you determine whether an accountant, banking partner, or software/service is best for your business.
Regardless of the solution you choose, you’ll still need to do the following, either yourself or with the assistance of a financial professional.
Setup and Prep
The questions you answered above will help you in preparing to set up payroll.
- First, you’ll have to create a payroll framework. Consider your location or locations. How and how often are your employees paid? Are they independent contractors? What benefits, if any, do you or will you offer?
- Create thorough records for each employee. You’ll want to include basic contact information, pay type, pay frequency, benefits, any withholdings as well as any state or federal requirements such as sick leave or FMLA.
- Include historical data in your records. If you’ve already run one payroll, you’ll need to enter previous payrolls information. Because payroll information is time sensitive, some companies try to begin using their new payroll systems at the beginning of the year.
The penalties for late or missing payments can be high. So.
It’s important to be sure you have a system that can not only calculate taxes and withholdings but do it correctly.
Most of the sites mentioned, particularly cloud-based applications, are able to calculate taxes for every payroll run taking this critical obligation out of your hands.
That is, they calculate the required amount of taxes from total wages minus any withholdings.They also submit to the various agencies requiring employee status and data.
Once setup is complete, your payroll solution site will display a screen with employee details such as names and pay scale or rate.
All you’ll need to do is enter how many hours they worked and if you need to calculate pay types such as PTO or sick time.
If you need to enter exceptions such as bonuses, commissions, or reimbursements; now is the time to include that information.
Many systems offer you a preview option so you can be sure everything is correct. It takes just a few minutes to review before you hit the button that submits your pay run.
The preview includes payroll items such as dollar amounts or paystubs and lets you know how much will be taken out of your bank account and when.
Other Things to Consider When Choosing a Payroll Solution
While all five have many similarities, they also have differences.
They all come from trustworthy companies with years of experience in developing and creating payroll tools.
All of them are designed for small business as well.On the flip side, some of them, such as Sage Payroll Essentials, lack a mobile version and in today’s market.
This may be a reason to go with another solution that does offer a mobile version. At the very least, every site offers QuickBooks integration. Some sites offer more integration connections.
For the most flexible option, Paychex Flex may be the best solution as it integrates with more accounting applications than any of its competitors.
While all options offer check or direct deposit, only Paychex Flex and Sage Payroll Essentials offer the option of payment on a prepaid debit card.
For businesses with more than five employees or who don’t employ independent contractors, you may want to look at solutions that include human resource services.
All of the sites here touch on human resources, but some offer much more than others.Intuit Enhanced Payroll offers the least in regard to HR, offering only labor law posters.
While they do offer tax calculations for payroll, they don’t do the filings like many of the others. In this case, you must be sure to do the filing.
For other HR requirements such as insurance, retirement, pre-employment screening, and retirement plans, it may be best to consider an all-in-one HR and payroll service.
Though it’s important to consider number of employees, company location(s), and employment types, there a few other things to think about when considering a payroll solution. This is a slightly deeper dive than previously addressed.
Your single biggest focus as a small business, after your employee information and details, is cost.
As a small business, your budgeting for running payroll may be a determining factor in which payroll solution you choose.
It’s important to be sure it’s done correctly, but you also want the best bang for your buck.While the most expensive option is most likely paying.
Your business bank to process payroll or your accountant, the cheapest will be a software. Payroll software such as QuickBooks up to an all-in-one solution such as Gusto may be your best bet.
There are a number of compliance issues you need to consider when choosing a good payroll solution.
Compliance issues such as Worker’s Compensation or calculating payroll taxes will be things you need to think about as you hire employees.
If you just want to be sure they’re done and done correctly, you’ll definitely want to look at an HR software or payroll software as an option.
If you prefer to do payroll yourself, then there are options to simply buy worker’s comp through a broker or privately.
Keep in mind, however, compliance may not be guaranteed through your bank or accountant.
To guarantee you’re in compliance, it is definitely worth considering and HR or software provider in which compliance is built into the system.
Tracking – Time, Paid Time Off (PTO), and Leave
Whether you need to track logged hours, paid time off, or sick and vacation leave, you’ll want to consider a solution that integrates payroll with a time tracking software.
Ease of Use
Every site is easily navigable if you understand basic compensation management. All software solutions offer a dashboard to give you an at-a-glance screen showing payroll expense totals to upcoming payroll-related tasks.
In addition, the areas with the dashboard offer links for a deep dive into employee payroll information.
Best Payroll Solutions: Final Review
While it’s important to consider cost and compliance, or even PTO tracking, ease of use should be among the most vital factors.
What’s important to you when comparing payroll solutions? Share with us!
The WiseSmallBusiness Team is full of industry experts and successful business owners willing to contribute important business articles.