Expanding your team as a small business owner is really exciting! It shows that your business is thriving and attracting more people who believe in your vision. However, managing all the logistics of having a larger team can be a bit challenging (let’s be honest, not the most fun part for many of us).

Using online HR and payroll solutions can lighten your workload, allowing you to concentrate on the core aspects of your business. Forbes Advisor did some digging to find the top payroll services suitable for small businesses, helping you choose the platform that fits your requirements and budget perfectly.

Payroll is how we pay our employees for their hard work. It’s about figuring out how much they’ve earned, taking out things like taxes and insurance, and then putting that money into their bank accounts. Every company, big or small, has to do payroll.

Payroll services and software make this process easier by doing the math for us. They calculate everything from gross wages to deductions like taxes, insurance, and retirement contributions, making sure employees get their net pay. Plus, they help us follow all the rules about taxes at the federal, state, and local levels.

With payroll software, you can also create reports for audits and other needs. These reports help businesses maintain accurate records of finances and employees’ compensation info, all in one easy-to-access spot. It’s like having a handy tool that keeps everything organized for you!

Payroll Services are categorized into 4 different types:

Here, the employer handles payroll, either by hand or using online software. This method works well for small companies but isn’t great for those with lots of employees or more complicated payroll situations, like having staff in different states.

With this choice, a bookkeeper or CPA from outside the company takes care of the payroll. It’s perfect for companies that don’t want the hassle of handling payroll directly or those with lots of employees and tricky payroll needs, especially if they have staff in different states.

Hiring a specialized agency to handle your payroll gives you the benefits of having a bookkeeper or CPA manage it, plus the advantage of having a whole team of payroll pros at your service. This means more expertise and support, which can be really helpful, especially for big companies. It might cost more, but it’s a great option for those who need top-notch payroll management.

More and more small businesses are turning to payroll software because it’s affordable and easy to use. This kind of software is often cloud-based, meaning you can use it from anywhere with internet, perfect for companies with staff in different places.

Before an employee starts their first day, there are several steps in the payroll process. Here are the basics:

• Pay-day Cycle: This refers to how often you’re paying your employees. Many employers opt for weekly, biweekly, or monthly payment cycles.

• Gather information of employee and essential tax documents: These documents typically include the W-4 form, state tax withholding form, and details about the employee’s bank account.

• Calculate Gross pay for employees: “Gross pay”, in general means the complete amount an employee receives before making any additional deductions, including tax amounts.

• Net Pay: From the gross pay, we deduct taxes and any other amounts, leaving employees with the net pay they actually receive.

• Payment initiation: If you’re doing payroll by hand, you’ll write checks and mail them along with pay stubs. With direct deposit, you’ll start a transfer. Using a payroll service like Gusto means the platform will handle payments according to a set schedule.

• Keep records of paid taxes and payments: Lastly, you’ll settle the federal and state taxes you owe and keep detailed records of all payroll and tax transactions.

• Settle accounts: This involves checking the payroll account against the company’s financial records to make sure all payments during the payroll period are accurate.

Online payroll services offer a range of handy features to help you handle your employees’ pay smoothly. Here are some features you should keep an eye out for:

• Perfect Calculations: Making sure payroll calculations are accurate is crucial for paying employees correctly and following state tax laws. Using software for these calculations is usually more accurate than doing them by hand, which can help avoid mistakes.

• Tax payments: The software typically helps with filing taxes every quarter and at the end of the year, including making online payments to state tax authorities.

• Automation: Payroll software can take care of many administrative tasks automatically. This includes calculating deductions, handling online filings and payments, and managing W2 forms for employees when the year ends.

• Updates on Compliance: Online payroll services usually keep you informed about any updates or changes in state and federal laws related to payroll taxes.

• Direct payments to employee: When choosing payroll software, make sure it allows you to pay employees through direct deposit. This ensures that employees get their payments on time and without errors.

• Customization: Many payroll solutions come with customizable features that let business owners adjust their payroll processes to fit their unique needs.

• Security: A reliable online payroll service needs strong data encryption to safeguard sensitive information from outside risks.

• Employee self-service portal: Employee self-service portals online can simplify tasks like onboarding, managing information, and accessing timesheets. This can save HR time and make these processes more efficient.

• Analytics and Reports: Certain platforms provide reports and analytics to assist in monitoring and handling payroll data, as well as gauging overall productivity and performance.

• Interface Integration: Lots of payroll services can connect with other online platforms, like accounting software, for smoother operations.

• Mobile applications: Certain online payroll services have mobile-friendly interfaces, allowing employees to access their information conveniently from any location and at any time.

While they may look different and have different features, most online payroll services operate in a similar manner. They usually have a cloud-based portal that employers and employees can access. Employers, along with accountants, bookkeepers, or HR staff, can set up employee benefits and salaries, including for contractors on some platforms.

When you hire someone new, you can invite them to use the employee portal for self-onboarding. This way, you can easily collect their W-4 or W-9 form, contact details, and they can sign up for any applicable benefits.

Certain payroll services provide automated payroll features, allowing you to schedule worker pay and giving employees the option to track their time if needed. These services automatically run payroll as per the schedule you set. Employees can input their direct deposit details, and on the employer side, you connect a business bank account, eliminating the need to print and deliver physical checks for payroll.

If you don’t have automated payroll, you’ll need to manually run it a few days before payday. This involves entering the amounts for worker pay and scheduling when employees get paid.

Lots of online payroll services come with tools to manage benefits right within the same platform. They also often integrate seamlessly with accounting software. Many offer employees the choice to use a payment card, allowing them to access their money before payday and use the card directly for purchases.

Additionally, some payroll services are part of larger HR platforms that go beyond just pay and benefits. They may include employee development, educational resources, and coaching programs to support your team’s growth and well-being.

The price of online payroll services can vary a lot depending on the brand and what features they offer. Many online payroll companies have different monthly plans, giving businesses the flexibility to pick the one that suits their needs and budget. Plus, these online services often charge less than traditional payroll providers, which is great news for small business owners looking to save money.

The monthly cost of online payroll services can vary widely, ranging from around $20 to $300 per employee. Cheaper plans typically offer basic payroll features, with extra services available for an additional cost. For more comprehensive solutions, expect to pay a higher fee.

Additionally, some systems offer a global employer of record package for an extra fee. This means that the online payroll provider takes care of filing all the required reports and documents when hiring employees in international locations.

This is crucial for businesses that have to handle payroll across multiple countries.

When choosing the right payroll software for your company, think about what your business does and what you require. Here are some questions to guide you:

• What is the size of your business?

• What is the total number of employees in your business?

• Do you have hourly or salaried employees?

• How frequently do you pay all your employees?

• What will be your budget for a good payroll software?

• Who will look after the payroll calendar?

Providing clear answers about how you handle payroll is crucial when picking payroll software. Different plans are tailored to suit businesses of various sizes.