What to look out for in your payroll management system

Few administrative processes are more important to a company than its payroll management. Getting payroll “right” is expected by all employees, and when it is wrong, employees let you know about it.

As important as knowing how to run payroll is, it is equally critical that your payroll management system is up to administrating your company’s payroll needs. However, choosing payroll management software that meets your business needs can be tricky.

Here is how to ensure you choose the right payroll software that meets your needs now and can grow with you as your business grows.

What Do You Need in Your Payroll Management Software?

Payroll software can do as little as you want it to, but on the other end, it has its limitations.

Systems are often underutilized, which is unfortunate, but more often, a business’ complexity in managing pay, bonuses, benefits, etc., exceeds the existing payroll system. Another common flaw is that a growing business selects a system that quickly exceeds its capabilities and cannot grow with the employee base.

If you select a system that does not meet your needs now and in the future, you will go through the same selection process quicker than you need to, costing your company money. If you must add features to your payroll management software, the cost can be high, particularly if you customize any part of the software to meet your unique business needs.

Answer these questions to get an idea of what your business needs regarding payroll management software:

  • How many seasonal, part-time and permanent employees do you have?
  • Do you manage benefits for employees, and if so, how many?
  • How often do you run payroll?
  • Is your payroll staff highly experienced, and can they handle sophisticated software?
  • Do you print any part of the payment process for employees?
  • What reports do you typically need each pay cycle?
  • Do you want or need an online system or a stand-alone system?

The answers to each of these questions can help you quickly rule out those systems that are not adequate and those that do a lot more than you need them to do.

Robust Compliance

While getting employees pay and benefits is important, meeting all legal and compliance rules is more important. Your new payroll management system must meet local, state, and federal tax laws, benefits regulations, and administrative rules. Not doing so can cost you both legal fees and fines.

In this regard, the best approach is to go overboard and ensure your system maintains compliance and goes beyond what is necessary. Talk with your payroll staff and find out what your staff needs. Learn about regulations and mandatory processes from sites like the American Payroll Association. Consult a payroll specialist if your staff are not experts in payroll management. 

Who is a payroll specialist? A payroll specialist knows any legislative changes that have occurred over the last few years and any in the works that might affect your payroll administration. A consultant is an added expense but well worth it if you get superior knowledge from your internal staff.

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Identify Analysis Needs

Almost all payroll systems generate reports of some form. Not all the reports available, however, meet every business’ needs. You might need a specific form analysis to get a handle on payroll and administration trends for a niche part of your business. 

Or, you may have several departments with different payroll needs and want to stay on top of trends in those departments.

Each business is unique, even though payroll data is much the same, no matter what company is administrating it. How the data is used and looked at by various companies and managers is different. For example, you might not care how much your developmental staff payroll is, but you might want to know exactly how much your sales staff is costing you.

The only way you can define your needs is to sit down with existing staff and figure out what they use now for analysis and what they provide you. By talking with a payroll specialist, you may discover that reports you were not aware were available would help you or the company’s management team make informed and better staffing decisions.

Pinpoint Features You Need in Your Choice of a Payroll Management System

Each of the above steps will help you get to the point where you can identify exactly what features you need from a payroll management software system. Once you get through each step, you should be able to map out exactly what you need and what features you might want.

Additionally, you should be able to gauge if the systems you are looking at will meet your needs and if they can grow with your company.

Take some time and list the features that are important to you. Some of them will include, but not be limited to:

  • Ease of multi-level tax filing
  • Capacity to print checks and use online deposits
  • Departmental integrations to help streamline personnel management programs
  • Online data access and autonomy for employees
  • Payroll, tax, and benefits management for employees
  • Access to the payroll system for employees by mobile devices
  • Multiple data analysis and reporting tools that are customizable

Create a spreadsheet that lists every feature you need and the features you want. Compare different payroll management systems and analyze what systems give you the most features you need or want and if there are any that give you everything you are looking for in a payroll management administrative process.

Wants Versus Needs Versus Capabilities

Your feature requirements will rule out software platforms that will not meet your needs or give your staff the tools they need to do their jobs in the most efficient manner possible. Mapping out the features will also let you and your staff make value judgments about what you need versus what you want.

For example, one system might have most of what you want but lack something you need. Another system might not offer everything you want but might give you what you need to run your payroll accurately. Finally, a system might give you all you want or need but might be too cumbersome or complex for your staff or payroll needs.

Once you have the list of features you want or need, you are ready to consider the financial costs of the system you want.

Set a Budget for Your Payroll Management Software

Set a Budget for Your Payroll System

It is easy to get caught up in defining features that would be nice to have but you may not need. The tradeoff is that, typically, every feature increases the overall cost of the payroll software system. One way of ensuring you and your staff do not go overboard and buy a system with features that you do not need or will hardly ever use is to set a budget for the entire system.

Things to consider when setting a budget for your payroll software include the following:

  • The base cost for the software before setup or training
  • Features costs such as fees for direct deposit, checks, check signing, etc.
  • Base fees for maintenance and updates
  • Additional fees for running tax or data reports
  • Costs of customizing the system to meet your business needs
  • Setup and training costs

Get a hard figure for each of these areas and any other areas that come with “associated” or “additional” costs. When discussing your system with a software representative, ask them directly for a list of all fees associated with their system. If you are using an off-the-shelf payroll management software, read up on users’ reviews and pay attention to extra fees and costs.

From this point, you should be able to narrow your options to a few systems that do mostly what you want or all of what you want and need and are affordable.

Take the Finalists for a Test Drive

Test each system and each feature you need. Do not just use one record, but run your entire company through a mock cycle, so you get a feel for how smooth or clunky the system will be when your staff uses it regularly. A dry run of test data will also give you an idea of the learning curve of your staff.

When you have run the system through a basic test, use the same data and test features you may want in the future. For example, if you are contemplating a 401k program, run the system through that. If you are introducing an incentive program for your commissioned staff, make sure the system can handle processing and compliance for incentives.

The more you can test each payroll management system, the better a feel you will develop for what you need and what you will need in the future. As importantly, you will rule out systems that do not meet your needs, are too complex for what you want, or are difficult to use.

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Learning How to Run Payroll

Your payroll management system can help you identify pay trends, manage benefits, ensure compliance and administrate employee programs. By following this checklist of what to look out for when selecting a system, you will guarantee that the system you choose will meet your needs and grow with you.

Emenike Emmanuel
Emenike Emmanuel is a multiple award-winning blogger, CEO of Entrepreneur Business Blog, Chief Evangelist of Ebusinessroom Ventures, and the Lead Coach of an online community of over 12,000 business owners called, The Excellent Entrepreneurs' Network. He’s here to help you start, manage and grow a profitable and sustainable business using digital marketing strategies. Follow him on Facebook, Twitter, Instagram, LinkedIn & Pinterest with this handle, @emenikeng. Telegram group - t.me/yourfirst1000 | Email: [email protected]

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