How to Choose the Best Payroll Software

Critical Success Factor in Payroll Software Evaluation

Employees don't care what you use to process payroll—as long as their paycheck or automatic deposit goes through without a hitch. But you do care: After all, selecting the payroll software best suited to your needs can deliver both time and dollar savings, allowing you to do more with the same or fewer staff.

It is, of course, important to get input from the people who will use the software: starting with the payroll and human resource personnel who understand their current practices and, no doubt, can pinpoint their strengths and weaknesses. It's equally important to include IT professionals who will put prospective technology solutions through their paces and implement and support the new payroll system. Finally, it's critical to have C-level buy-in. Without executive sponsorship, the project is doomed and is unlikely to receive the necessary funding.

Getting the right software selection project team in place is a prerequisite to making the right payroll software selection decision.

Good Projects Begin and End with Good Project Teams

The software selection team must then create a comprehensive, categorized and weighted list of must-have and would-like-to-have capabilities.

Why have multiple piece meal software programs, mish-mashed together by your hard-working IT team, when you can purchase a complete payroll software solution that encompasses all the features you need, right out of the box? Considering the big picture and reviewing payroll, human resource, human capital management and talent management applications holistically, even if some of these applications are in the distant future, can help plan for a pre-packaged and vendor-managed integrated solution, and keep your company out of the system integration business.

With the big picture in mind, and a plan to minimize all too common technology challenges, the team can then compare business processes to payroll software functionality.

Key payroll software capabilities include:

• Automatic tax calculations for Federal withholding, Social Security, Medicare, and state and local taxes.
• Support of federal documents such as W-9, 941,940 and 944 forms.
• Customizable deductions, tax categories and income to meet the vagaries of your business or industry.
• Direct deposit to cut check-printing and mailing costs, a favorite of many employees.
• Tracking each employee's sick leave, time off and salary.
• Check-printing that enables the use of preprinted checks and the printing of your own checks.
• Reliable and proven security to ensure information is protected from unauthorized internal users and external threats.
• Business reports for analysis, trending, governance and tax-related reporting.
• Ability to import and export from Excel and other business applications to automate, streamline and ensure accuracy.
• Ease-of-use to prevent the need for expensive, time-consuming training, and improve user adoption.
• Accessible and free or inexpensive technical support to make sure you get help as and when you need it.

Other features to consider may include: garnishments such as child support payments; company car benefit calculations; integration with financial or ERP software; integration with human resources applications; tax tables for multiple states; vacation-pay support; pension and contributions calculations; back-pay; audit trail support, and court order support, recommends SoftResources.

Payroll software should eliminate repetitive, often accuracy-prone, tasks such as data entry and re-entry, and cut the costs associated with printing checks or manually determining customized deductions. It frees-up often over-tasked support staff from crunching numbers and ensures compliance with state and federal tax laws.

Cloud Payroll: Best of Both Worlds?

As part of the payroll software selection project you'll want to determine the preferred software deployment method, be in on-premise or on-demand from the cloud.

Many businesses opt for payroll services that manage and control an organization's employee pay. Others want the total control that software ownership and in-house processing provide. There is an alternative to in-house software and payroll services, a model that takes the best of both worlds: Cloud payroll software.

With web-based hosted services, you contract with a cloud payroll service provider to power-up, maintain and support your software using the partner's investment in servers, networks and IT professionals. In return for what is normally an employee or user-based subscription fee, you own the data and they own the payroll software. You have a predictable monthly outlay for your payroll system at a lower price than that of a payroll service firm, and you have control over payroll-related data. The risk of downtime is dramatically slashed, with hosted providers penalized for non-compliance with their Service Level Agreement (SLA). Rollout is faster, since you don't need to buttress the IT infrastructure or to physically download payroll software to each authorized user's PC. In addition, pursuant to security permissions, authorized users can access information remotely.

IT doesn't need to add servers or infrastructure to support an expanded headcount. Nor must it expend resources maintaining or upgrading the payroll software. Since 70% of small businesses polled by Spiceworks plan to accomplish their goals with the same or fewer IT staff, it's important to eliminate low value and redundant tasks everywhere possible.

Payroll Software Short List

Your software review team should create a list of about three finalists based on the information they've gleaned from company and independent websites, experiences at former employers, social media feedback and recommendations from professionals in your field.

Whether you opt for on-premise or hosted payroll software, you must complete thorough product demonstrations and speak to the three contenders' clients, asking hard questions about implementation, support, security, training, maintenance, upgrades and performance. Live software demonstrations should include scenarios based on your business, not a make-believe sample corporation, and make sure presenters know both payroll software and related business problems. Not all applications will include every feature you want, so find out about the availability and cost of add-on modules or customization services well before you're presented a purchase agreement.

If you opt for a hosted payroll solution, discuss the provider's Service Level Agreement as well as their Information Security Management System (ISMS) disaster recovery plan and availability of multi-channel support, possibly around the clock.

When you invest in thorough pre-purchase planning, you are more assured of selecting the payroll solution that best meets your specific needs. That's something you - and all employees - can bank on each payday.