How to Choose Payroll Software

If you want to run payroll in-house without hiring a bookkeeper, payroll software is one affordable, time-saving solution. Business.org explains how to find the right payroll solution for your needs.

Payroll software can save you time, money, and stress—as long as you choose the right payroll software for your business’s needs. With hundreds of software options on the market, how can you find the right one for you? Below, Business.org explains how to evaluate potential payroll systems based on features, pricing, scalability, customer service, and your own unique requirements.

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Payroll 101

Are you new to small-business payroll? Our Ultimate Guide to Payroll explains what payroll is, how to choose a pay schedule, how to process payroll, and whether payroll software is right for your business.

Your payroll needs

Before you start searching for payroll processing options, narrow your search by determining what role you need payroll to play in your organization. You can do so by asking the following key questions.

What level of payroll management am I looking for?

Self-service payroll stores your employee data and automatically calculates payroll payments and tax withholding amounts, but it leaves paying your employees and filing payroll taxes up to you. Full-service payroll calculates employee paychecks, withholds taxes and other withholding amounts, and automatically files paperwork for you. (It also costs more than self-service payroll.)

How much money have I budgeted for running payroll?

Most payroll companies charge a monthly base fee and an additional cost per employee. Additionally, the more features your software has, the more it will cost per month.

What types of employees do I work with?

If you work solely with contractors, you can find a contractor-only payroll plan (like Square Payroll’s) that costs less per month. If you work with both W-2 and 1099 employees, you’ll need software that allows you to manage both types of workers. (And for the record, that’s most payroll software.)

How do I want to pay my employees?

Almost all online payroll software providers use direct deposit as their primary payment option. Some offer additional payment options, including paper checks and prepaid debit cards, but these payroll options tend to cost more.

What benefits am I offering my employees?

Along with paying your employees and calculating your taxes, some payroll software companies offer benefits packages. For instance, Gusto helps you find workers compensation insurance, medical and dental insurance, and 401(k) packages that integrate easily with payroll software to make payments as simple as possible for both you and your employees.

How often will you run payroll?

Some payroll systems charge you by the month, but others charge you by how many times you run payroll (meaning how often you pay your employees). Typically, per-payroll plans cost more, and we recommend choosing software that offers unlimited payroll runs. On the other hand, if you pay contractors infrequently, a payroll-run-based software might save you more money in the long run.

Payroll, tax, and HR features

Now that you know what you need your payroll management system to do, you can start looking for software that fits those requirements.

Payroll features

First, you’ll want to assess a provider’s payroll features, which could include the following:

  • Paycheck calculations
  • Payroll tax calculations
  • Direct deposit, paper check printing, prepaid paycheck cards, or other payment methods
  • Tax form generation, including the tax forms business owners must submit to the federal government and tax forms you must distribute to your employees by law

Of course, your online payroll software shouldn’t just provide the above services—it also needs to make the payroll process as easy as possible for both you and your employees. Depending on the software, user-friendly features could include the following:

  • Employee self-service portals where employees can update their direct deposit information, access tax forms, and print off pay stubs
  • Employer-facing mobile apps for running payroll on the go (most payroll software lacks an employer-facing app, so if this is an essential feature for your mobile business, check out our list of the best payroll apps for employers)
  • Employee-facing mobile apps so employees can check their payroll information from anywhere (and even clock in and out, depending on the software)
  • Accounting software integration to eliminate redundant data entry and keep your books balanced

Similarly, some payroll companies offer benefits specific to different types of workers. For instance, some integrate with time clocks (or offer a built-in time clock) to make paying hourly employees as simple as possible.

Best Small Business Payroll Software
Gusto
Best overall
ADP
Best HR add-ons
Paychex
Best reporting
OnPay
Simplest setup
SurePayroll
Best customer service
Learn more about our top brands.

Tax features

Like we said above, payroll software can be self-service (you file taxes yourself) or full-service (the software automatically files taxes for you). Regardless of the type of software you choose, your payroll provider should offer a tax-filing or tax-calculation guarantee. These guarantees ensure that if the payroll provider makes a mistake with your taxes, the provider will deal with the IRS and pay associated fines.

We strongly recommend choosing payroll software that includes a payroll tax guarantee. Payroll service providers that leave off a guarantee are making you responsible for their payroll mistakes—which puts you in a risky position with long-term financial consequences.

HR features

If you’re interested in software that bundles payroll with other HR features, prioritize software with add-ons like these:

  • New hire onboarding
  • Automatic new hire state reporting
  • Retirement plans
  • Health insurance plans
  • Workers compensation insurance
  • Other benefits (commuter benefits, scholarships, etc.)

HR and payroll packages should also let you tackle crucial HR tasks like benefits administration.

Pricing

Most payroll plans charge a monthly base fee and an additional fee for each employee. You should also be on the lookout for common fees like these:

  • Accounting software integration
  • Time clock software integration
  • 1:1 customer support
Tired of payroll? Gusto handles payroll taxes and more

With unlimited payroll runs and automatic tax filing, Gusto helps small-business owners worry less about payroll and put more time into growing their business.

  • Get automatic payroll tax filing, including end-of-year tax forms
  • Manage workers compensation insurance
  • Track paid time off, sick leave, and holiday pay

Scalability

Some payroll providers, like OnPay, offer just one payroll plan. With providers like these, your price depends on the number of employees you have—there aren’t more expensive plans with, say, additional HR features.

Other payroll software solutions, like SurePayroll, offer two plans: a cheaper self-service plan and a more expensive full-service plan. And still others, like ADP and Gusto, offer a variety of plans that include more features as they increase in cost.

It’s not too tricky to transfer payroll data from one provider to another. But if you anticipate major employee growth over the next few years, you’ll save future time and hassle if you choose a provider with scalable plans. That way, you can simply upgrade to a heftier plan through the same payroll solution instead of searching for an entirely new provider with different benefits, processes, and customer service teams.

That isn’t to say you shouldn’t choose a payroll provider that has just one plan. (In fact, OnPay is one of our favorite providers, and its single plan still has a variety of features for teams of all sizes.) It just means that when choosing a payroll solution, you’ll want to think about your future payroll and HR needs—not just your current ones.

Customer service

Getting pay right is important to your employees, your business, and (especially) the federal government. So if you run into software problems, you need assistance from a real live person as soon as possible.

Before committing to a payroll service, make sure to read through a company’s customer service contact info. Is customer service available on weekdays only, or can you get help on weeknights, weekends, and holidays too? Can you get in touch with customer service via email only? (If so, run the other way—fast.) Does the company’s website include a forum, FAQ section, or library to help you troubleshoot problems, or is your only option for help an endless phone tree staffed by robots?

You can find answers to some of these questions—and get a handle on a payroll provider’s reputation—on consumer review sites like Trustradius and Trustpilot. We also recommend reading reviews on the Better Business Bureau and checking out mobile app ratings on Google Play and Apple’s App Store.

Of course, take online reviews with a grain (or, depending on the review, a heaping spoonful) of salt. Only the most passionate consumers tend to leave reviews, which means they often reflect extremes. Still, if multiple customers report the same problems, you can generally take them at their word—assume that if you sign up, you’ll encounter the same problem too.

Payroll software FAQ

How do I find the best payroll software?

To find the best payroll software for your small business, ask yourself some central questions about your company’s payroll and HR needs:

  • Do you need fully automated, HR-inclusive payroll software, or would you prefer bare-bones software that helps you calculate paycheck amounts while leaving everything else in your hands?
  • How many employees do you have? What types of benefits do you want to offer them?
  • Do you want payroll software that integrates with the small-business software you already use, like accounting software or time-tracking apps?

Once you’ve used these questions to assess your needs, you can start looking at payroll software options that meet your criteria. (If you’re looking for a place to start, we’ve hand-picked and reviewed a few of the best payroll options for small businesses.) Then sign up for either a free trial or a free demo to make sure the software you’ve found really does match your list of needs.

What should I look for in payroll software?

After evaluating your business’s payroll requirements using the questions we listed above, review the following features of any payroll software you’re considering:

  • Payroll and HR features
  • Tax filing, guarantees, and legal compliance
  • Ease of use
  • Third-party software integration
  • Pricing
  • Number of plans
  • Customer service hours and availability
  • Customer ratings and reviews

Which free payroll software is best?

If you’re looking for completely free payroll software, we recommend Payroll4Free. It lets you run payroll (for free, obviously) for up to 20 employees. It includes features some paid providers don’t, like PTO tracking, free accounting software integration, and access to pre-filled tax forms. If Payroll4Free won’t work for you, check out our other free payroll options—you might find a better match.

Alternatively, if you have just a handful of employees and feel good about your organizational skills, a free spreadsheet template can help you calculate payroll and generate employee payslips. But if you want typical payroll software perks like tax filing, tax forms, and HR add-ons, paid payroll software is the way to go.

The takeaway

There’s no way around it: payroll is complicated. But once you find the right payroll software for your business, you can start minimizing the time, hassle, and stress you might associate with payroll. And don’t forget that nearly all payroll providers offer free trials (or, at the very least, free demos). Definitely take advantage of those opportunities—the wrong payroll software adds to your stress, so taking the time to find the right software is absolutely worth it.

Ready to start running payroll? Check out our list of the year’s best payroll providers for small businesses like yours.

Related reading

Disclaimer

At Business.org, our research is meant to offer general product and service recommendations. We don't guarantee that our suggestions will work best for each individual or business, so consider your unique needs when choosing products and services.

Kylie McQuarrie
Written by
Kylie McQuarrie
Kylie is an accounting writer for Business.org. Kylie spent two of the last four years writing for and with small-business owners—from dentists in Australia to plumbers in the Midwest. She spent the other two writing in depth about internet and security. She’s passionate about reading, hiking, and dedicating every spare second to writing for fun (at lunch, between meetings, on the train, before breakfast . . . ). Her content helps small-business owners tackle the logistics of running a business so they can focus more on their passions too.
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