Payroll Software Guide: What is Payroll & How Does it work?

Our Guide to Payroll Solutions

Payroll solutions and systems automate, manage and maintain the employee payment process and taxes. Managed software reduces the risk of payroll mistakes as it ensures companies of all sizes are compliant with financial regulations and tax laws. Find out everything you need to know about Payroll software and how it will benefit your business.

Cloud-based

Cloud-based payroll software is software that’s hosted on the cloud. Prior to COVID-19 where thousands of businesses transitioned to remote working, many companies relied on on-premise payroll, but as more companies operate on remote or hybrid models, they’re transitioning to cloud-based software that can be accessed wherever, whenever. Employees can work from any location and have access to up-to-date information that’s safely and securely stored on the cloud.

On-premise

On-premise payroll software is stored onsite on a local server or computer. On-site payroll software used to be the most popular type of payroll, but more and more companies are choosing to opt for cloud-based or integrated systems. This is because on-premise payroll software doesn’t work for every business. There are hidden costs associated with on-premise software, such as warranties and hiring IT professionals to manage the system, undertake maintenance and monitor security and storage space.

Integrated systems

Integrated payroll software links up to other software, making data transfer easy and simple. When payroll systems are integrated, processes are automated which saves time, money and resources. This type of system can also scale alongside a business. For example, when a company integrates their payroll, HR and time and attendance software, reporting is consolidated, data is consistently updated and overall compliance is improved.

Assess your current processes / software and business goals

First things first, it’s important to look at your existing software and processes so that you get a real understanding of existing collateral and what it’s not doing. You should also think about the level of business analysis required. Do you need a breakdown of payroll across different departments? What reports do you need? In tandem, you should also consider your business goals, and how payroll software can help you achieve them.

Determine your payroll budget

Budget plays a critical part of the decision making process. In most instances costs can be broken down into the following: A base fee - this is usually a subscription fee - you should query which features are included. Tax and compliance - some payroll providers will have additional charges when supporting compliance and taxes, including mailing, reporting and W-2 printing. Set up fees - there may be instances where payroll providers charge set up and onboarding fees. Pay runs - payroll companies may charge a fee for how often payroll is administered, or how many employees payroll is administered to.

Make the most of demos

Seeing demonstrations of how payroll software works will give you great insight into usability, features and much more. Any reputable payroll provider should be more than happy to provide you with a demo of their software - some may even offer a really basic free trial.

Have a look at reviews and testimonials

When considering a payroll software provider, you should have a look at platforms such as Trustpilot and Reviews.com to get first hand advice from existing customers. Testimonials and case studies are also a great indicator of how good the company is.

Look at what’s on the market

Once you have a clear understanding of your business goals and what you need from payroll software, it’s time to do your research and look at what’s on offer. When having a look, you should ask the following questions; Does the company offer cloud-based, integrated or on-premise software? Does the system use ISMS systems and policies in place including ISO. 2700-1 and GDPR? What level of support, onboarding and training does the company offer? What do their existing customers have to say about them? Is the software HMRC, BACs and FCA approved? What niche features does the managed service offer?

Outsourcing Payroll vs In-House

One of the biggest debates when it comes to payroll is whether it should be outsourced and managed, or completed in house. Every company needs a form of payroll system in order to accurately process employee payments and send out payslips on time. Whilst choosing to do all payroll in-house may seem lower cost, it is an admin heavy process that takes a lot of time. When a business owner chooses to outsource payroll, they’ll be freeing up resources, time and talent that can be spent elsewhere. Additionally, there’s higher risk of mistakes being made, which ultimately can cost much more in terms of fines and penalties.

Several companies choose to do their payroll in house as they’re concerned about lack of control. It’s important that managers and owners work with reputable payroll companies and do their research if they’re considering outsourcing. A managed payroll company will only be as good as the importation a company gives them. If HR or finance isn’t updating the system with any changes, there may be mistakes. But the same goes for in-house spreadsheets and data entry.

What happens when you choose a bad payroll provider?

The saying goes, “there is no pack of cards without a knave”, and the same goes for payroll software providers. Whilst there are some excellent payroll solution providers, there are some less desirable ones too. When you choose poor payroll software, it can negatively impact company morale, staff retention and even lead to fines and penalties. Find out about common payroll mistakes and how to avoid them.

The Future of Payroll

Digital transformation has transformed the way payroll, time and attendance and HR operates, and it shows no signs of slowing down anytime soon. As new technology such as automation and AI (artificial intelligence) comes into play, it brings new opportunities. According to CIPP (the Chartered Institute of Payroll Professionals), “Payroll is an ideal candidate for robotic process automation (RPA).” RPA can be integrated with existing systems, and increases accuracy rates, minimises errors and reduces manual entry, all of which have massive cost saving benefits. When you unify your employee data across your new and existing platforms you will increase the quality of your data by reducing admin and associated errors. At Payescape we understand the importance of automation and integration, which is why we’ve partnered with many widely recognised Accounting, HR and Time Management providers to ensure that our solutions integrate seamlessly with our customers’ existing solutions.