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TechnologyAdvice Payroll Software Buyer’s Guide
Almost every business is required to process payroll on a weekly, bi-weekly, or monthly basis. It’s critical, then, that businesses streamline the process; payroll not only affects an organization’s net income, but is also subject to ever-changing taxes and regulations. Payroll errors –even honest accounting mistakes– can cause severe repercussions.
Because of these complexities, it can be difficult for businesses to ensure that employees are paid accurately and on time. Reliable solutions that help automate the process are invaluable. This guide details functionality every payroll solution should offer, key points for businesses when they compare the best payroll software on the market, including case studies for organizations of any size.
Payroll Software Comparison
|Standalone / Accounting||Core HR||HRMS Suite|
|Quickbooks Payroll||Oracle HCM||Kronos|
The Growing Payroll Market
With over 120 million employees predicted to enter the workforce in the next few years, the global market for payroll solutions is expected to grow almost $7 billion by 2018 1. The US payroll market alone is predicted to exceed $20 billion in 2017 2.
Key trends driving market growth are:
- Increased outsourcing of payroll services
- Increased adoption of Software-as-a-Service (SaaS) payment models
- Increased demand for hybrid payroll solutions
Payroll vendors can traditionally be separated into two distinct groups: software or managed services. Businesses had the option of purchasing software to enable payroll processing in-house, or, instead, using a managed payroll service responsible for printing, shipping, and transferring checks and W-2s, and remitting taxes to state and federal governments.
However, not all businesses have the resources (or desire) to process in-house, nor do they want to sacrifice complete control of payroll. As a result, hybrid payroll solutions, which incorporate aspects of both cloud-based software and outsourced services, have blurred the line between the two groups.
It’s becoming increasingly common for companies to pick and choose which functions to outsource. For example, hybrid models allow you to simply process payroll via a web-based app, and then have an outside service print and deliver checks (or manage electronic direct deposits), as well as handle tax reporting and forms preparation requirements.
The Best Payroll Software
Good payroll systems track all compensation-related information. They save time by streamlining manual processes, mitigate the risk of tax noncompliance, and automatically track tax code changes. If the following features are not present in a solution, ability to integrate with a system that offers them is paramount.
- Wage Management: calculates pay type and frequency, bonuses, withholdings
- Benefits Management: one-time or recurring such as paid vacation or time-off, health insurance, retirement plans, educational assistance, moving expenses
- Time/Attendance Management: tracks employee hours
- Tax Management: processes federal, state, and local tax, as well as social security, medicare, unemployment, disability insurance
- Reporting: uses historical payroll data to generate reports such as quarterly costs and annual tax remittances
- **Prints checks or direct deposit: **supports printing either remotely or on-site
- Tax form preparation: provides employer, employees, and contractors with 940, 941, 944, 1099, W-2, W-3, and 1099-MISC forms
How to Compare PS Vendors
This market is filled with hundreds of vendors clamoring for your attention. Choosing a solution can be as difficult as finding the right employees for your business. Examine the following key aspects, as well as the features in the software comparison charts, to help you differentiate vendors and choose the best vendor for your business.
Processing payroll means having access to sensitive employee data such as social security numbers and banking account information. All solutions should have an easily configured security system, as well as administrative rules to govern who can see, modify, approve, report, and access employee data.
Integration and Suites
There is tremendous overlap amongst Payroll, HR, and Accounting software functions, so ensure systems can sync data. On average, companies manage over eight HR and payroll systems. However, it’s worth noting that over 33 percent would be willing to “sacrifice features in order to get a single vendor solution” 3.
Having a single, end-to-end HR suite can streamline processes since there are fewer databases to update and less chance for human error. Suites can make it easier to exchange data with other software, such as recruitment or talent management systems. Eliminating duplicate data entry, paperwork, and consolidating reporting processes are all benefits of choosing an HR software suite that includes a payroll module.
Even if you don’t require a full human capital management (HCM) suite, it’s still important to consider how your standalone solution integrates with other systems. For example, what does your current timekeeping system involve? Paper cards, electronic time punch? All of this information will need to be manually imported into your payroll system if it’s not offered as a built-in functionality. Simple integrations with common accounting, benefits, or time tracking systems are valuable, especially in terms of scalability.
Implementation will vary depending on the company size and complexity of setup. For mid-size organizations, payroll implementation will take between 2-4 months, with planning starting well before that. In enterprise organizations, 6-12 months is more common.
Most payroll providers recommend starting at the beginning of the year, as it is easier to make a clean move from one payroll platform to the other (for ease of processing and prevention of duplicate or missing information)
When switching payroll platforms, especially for larger organizations, it’s recommended to run the new and legacy system in parallel to test the processing capabilities of the new platform. This is a final step in the payroll implementation process, and is something that should be taken into account when planning.
The 3 Tiers of Payroll Software
Just as there is immense overlap among payroll and HR systems, many vendors now offer scalable payroll solutions suitable for any business. However, there are still some niche vendors that cater to specific-sized businesses, so keep in mind some of the solutions compared below also offer payroll tools for the other
Enterprise-level organizations require close integration between payroll and accounting. Companies of this size need a comprehensive HCM— or even ERP system– that includes a payroll system. With such large workforces, enterprise organizations benefit from suites that incorporate multiple systems in order to standardize internal processes and connect data.
Case Study: Allen Samuels Auto Group4
Allen Samuels Auto Group is one of the top dealership groups in the US. With over a dozen dealerships in 10 cities across Texas, Allen Samuels dealerships sell more than 12,500 new cars, more than 5,400 used cars, and more than 2,500 fleet units annually.
Dealerships sell significantly priced products with numerous financial incentives that constantly change for their 1,500 salespeople. As the company grew, the HR team at Allen Samuels were facing increasingly complex payroll processes and costs. This combination of complex payroll, such as incentive pay for demos and bonuses, tax administration, and customized deductions, with a 20 percent annual growth in employees, required extensive management and man-hours.
Allen Samuels’ payroll department became buried in details and unable to focus on other HR responsibilities, such as benefits and reporting. The payroll system they were using required figures needed to be manually collected, confirmed, and corrected — at both headquarters and each of the company’s multiple locations. With overnight overnight shipping, time to review payroll for each employee, and the manual corrections required before submitting, final payroll consumed five business days.
Allen Samuels switched to UltiPro to manage their payroll processes and keep up with annual employee growth rates exceeding 20 percent. Results:
- Achieved 85 percent productivity increase in payroll administration, enabling the HR team to expand responsibilities and focus on more strategic HR initiatives
- Improved ability to manage company expansion
- Enabled more time to be dedicated for strategic HR initiatives
- The cloud solution’s easy-to-use interface means newly hired staff can manage payroll with minimal training.
Though it’s not required, medium-sized companies will benefit from a comprehensive HCM, rather than stand alone solutions. Businesses at this level generally value a solution that encompasses full workforce management and facilitates business intelligence.
However, there are many vendors who specialize in mid-market best-of-breed vendors, so payroll integrations and functionality for medium businesses are overall robust and customizable to an individual business’ needs.
Case Study: Ghirardelli5
The Ghirardelli Chocolate Company is a manufacturer and marketer of premium chocolate products in America. Ghirardelli needed a payroll system that could improve efficiency and save time for the payroll department because they were spending a lot of administrative time printing and mailing pay stubs, making changes to employee profiles, and updating direct deposit information.
Their former payroll solution was unintuitive, difficult to navigate, and lacked customer support or system training. Ghirardelli still spent time on manual processes and paperwork, as well as updating employee information. Ghirardelli needed a robust payroll solution that could effectively manage a large database of 900 employees working in retail, operations, manufacturing, and management.
Ghirardelli wanted a vendor that would provide a dedicated and responsive support representative who understands Ghirardelli’s unique system needs and requirements, payroll functionality that enables people to see exactly where they are in the payroll cycle, and willingness to send service representatives for on-site training during implementation.
They chose Ascentis Payroll to automate and streamline payroll processes and for the configurable, flexible system. Results:
- Automated payroll system saves the department several hours a week
- Intuitive system allows administrators to accomplish work quickly and accurately
- Responsive customer service team and custom configured system
- High adoption levels of self-service program, which reduces work for payroll administrators
- No longer needed to print and mail pay stubs, which aligns with Ghirardelli’s commitment to be as “green” as possible
III. Small Business
Given the complexity of payroll processes and software, solutions dedicated to small businesses are becoming more common. Most small businesses do not have the time nor resources necessary to devote to payroll, so there is a lot of innovation in this market.
At this level, companies generally seek standalone solutions, though interoperability is still a concern. Small businesses should look for a tailored, hybrid solution that’s intuitive, alleviates tax compliance worries, and integrates with common accounting software or other industry-specific
Customer Testimonial: Farmgirl Flowers6
Christina Stembel is the first-time entrepreneur behind Farmgirl Flowers, a San Frisco-based company that delivers beautiful, locally-sourced, bicycle-delivered flowers throughout the city. Christina uses ZenPayroll because, “I’m not stressed about payroll. Just having that assurance is worth its weight in gold.
As a small business, we don’t need anything unnecessary taking up time that could be spent delighting our customers. With our company, we like to say it should only take you five minutes to order flowers, not an hour. ZenPayroll is that five-minute solution. We’ve saved so much time because we no longer worry about payroll.
Payroll can be daunting for a small business owner. I had my ‘a-ha’ moment the first time I ran payroll with ZenPayroll. I was training an employee to do it with me. She had no business background, yet it was so easy to show her how to use it; it literally took five minutes.
It can be intimidating to ensure you’re doing everything properly, especially with all the government payments and forms you have to manage. ZenPayroll makes it extremely easy and fast. Plus, at the end of the year, I didn’t need to do everything myself; it was already taken care of. The value you’re getting from ZenPayroll is worth 20x what you’re paying — it’s amazing.”
- Grinter, Sam. “Payroll Solutions 2014. IHS Technology.” August 2014. https://technology.ihs.com/api/binary/510563?attachment=true
- Grinter, Sam. “Hybrid Payroll Solutions to Drive $5.25 Billion of Market Growth Over Next Five Years.” IHS Technology. September 23, 2014. https://technology.ihs.com/511415/hybrid-payroll-solutions-to-drive-525-billion-of-market-growth-over-next-five-years
- Fairchild, Micah. “HR System Integration: Suites Versus Best-of-Breed.” Accessed February 11, 2014. http://www.hrlab.com/hr-suites.php
- “Case Study: Allen Samuels Auto Group.” Ultimate Software. Accessed February 11, 2014. http://www.ultimatesoftware.com/UltiPro-Case-Study-Allen-Samuels-Auto-Group
- “Ghirardelli Case Study.” Ascentis. Accessed February 11, 2014. http://www.ascentis.com/downloads/pdfs/Ghirardelli-Dec-2013.pdf
- “Featured Customer: Farmgirl Flowers.” ZenPayroll Customer Stories. Accessed February 11, 2014. https://zenpayroll.com/customers