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Top Rated
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Top Rated
Best Value
Expert Choice
Payroll Calculator and Payroll Software
Growing your team as a small business owner is exciting, but managing payroll and HR logistics can be overwhelming. Online HR and payroll services can take much of this burden off your plate, allowing you to focus on growing your business. Using a payroll calculator is highly recommended to estimate costs based on your specific needs, such as the number of employees and payroll frequency.
Forbes Advisor has researched the best payroll services for small businesses, helping you choose a platform that fits your budget and requirements. These services are scalable, making them suitable whether you have just one employee or a larger team. Many HR managers struggle with manual payroll processing, leading to unnecessary costs. Using a payroll service, along with a payroll calculator, can save time and money while ensuring accurate payroll management.
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What Are Payroll Services and Software?
Payroll is the process of paying employees for their work. It typically involves calculating wages, withholding deductions, and depositing money into employee bank accounts. No matter the size, all companies need to process payroll for their employees.
Payroll and software handles the important task of calculating and distributing employee salaries, wages, and benefits. This includes calculating gross wages, deductions such as taxes, health insurance premiums and 401(k) contributions, as well as net pay. It helps ensure compliance with federal, state, and local tax laws.
Payroll software can also help generate reports for audits and other purposes. Reports generated by payroll software enable a business to keep accurate records of its financials and employees’ compensation information easily accessible from one place.
Types of Payroll Services
There are four types of payroll services: In-house payroll, payroll managed by a bookkeeper or accountant, payroll managed by an agency, and software-managed payroll.
- In-house payroll
In this case, the employer manages payroll, which can be done manually or through online software. In-house payroll is suited for companies with a small number of employees. It is unsuitable for businesses with complex payroll needs or employees in multiple states.
- Payroll Services managed by bookkeeper or accountant
In this option, an outside bookkeeper or certified public accountant (CPA) manages the payroll for a company. This option is best suited for companies who want to avoid the responsibility of managing payroll themselves or those with many employees and complex payroll requirements. It is also suitable for companies with employees in multiple states.
- Payroll managed by an agency
Using a specialist agency to manage the payroll has all the advantages of bookkeeper or CPA-managed payroll with the added bonus of having an entire team of experienced payroll professionals managing your system. This increases the amount of specialist knowledge available and is a good—though expensive—option for large companies.
- Software-managed payroll Services
Payroll software is becoming increasingly popular with small businesses due to its cost-effectiveness and ease of use. It is usually cloud based and can be accessed from anywhere with an internet connection, making it ideal for companies with employees in multiple locations.
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Payroll Services Processing Stages
Payroll is a process with multiple steps that start before an employee’s first day. It is highly recommended to use a payroll calculator. Additionally, you can follow these steps:
- Decide pay cycle: This is the frequency with which you are paying your employees. Most employers choose either a weekly, biweekly or monthly cycle to make payments.
- Collect employee information and tax documents: These documents include the W-4 form, state tax withholding form and bank account information.
- Calculate gross pay: Gross pay is the amount employees are owed before taxes.
- Determine net pay: You will withhold taxes (and any other deductions) from the gross pay and employees will receive the net pay.
- Initiate payment: If you’re running payroll manually, you’ll cut checks and mail them out with pay stubs. If you are paying through direct deposit, you’ll initiate a transfer. If your payroll is managed through a payroll service such as Gusto, the platform will initiate payment based on a predetermined billing cycle.
- Pay taxes and keep records of payment: Finally, you’ll pay federal and state taxes owed and keep a record of all payroll and taxes.
- Reconcile accounts: This includes reconciling the payroll account with company financial records to ensure the accuracy of all payments made during the payroll period.
Payroll Services Management Features
Online payroll services come with a variety of features that make managing your employees’ pay easier. Features you should look for include the following.
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• Accurate calculations
Accurate payroll calculations ensure that employees are paid correctly and the business complies with state tax laws. Most software is less prone to errors than employees making these calculations manually.
• Automation
Most payroll software can automate administrative processes, such as calculating deductions, filing online reports and payments, and processing employee W2 forms at the end of the year.
• Tax payments
Most software will assist with filing quarterly and annual taxes and making online payments to state tax authorities.
• Compliance updates
Online payroll services often provide updates on changes to state and federal laws regarding payroll taxes.
• Direct employee payments
Look for payroll software that enables you to pay employees via direct deposit to ensure that employees receive their payments promptly and accurately.
• Customizable features
The customizable features of many payroll solutions allow business owners to tailor their payroll solutions to their specific needs.
• Employee portals
Employee self service online portals can make onboarding, managing information, and accessing online timesheets easy and take less time for HR.
• Security
A good online payroll service should have secure data encryption measures in place to protect sensitive information from external threats.
• Reports and analytics
Some platforms offer reports and analytics to help track and manage payroll data and measure overall productivity and performance.
• Interface integration
Many payroll services integrate with other online platforms, such as accounting packages.
• Mobile apps
Some online payroll services offer mobile-friendly interfaces so that employees can access their information from anywhere, anytime.
How to Use a Payroll Calculator to Choose the Best One
Although each online payroll service has a unique design with varied features, most work in essentially the same way. They typically include a cloud-based portal that allows both employers and employees to manage payroll tasks efficiently. Employers—or their accountant, bookkeeper, or HR employee—set up employee benefits and salaries, and in some cases, also manage payments for contractors.
When you hire a new employee, many payroll services allow for a smooth onboarding process via the employee portal. This enables you to easily collect important documents like the W-4 or W-9 form, as well as contact information, and for the new hire to sign up for relevant benefits directly. This process simplifies the initial setup and ensures that all necessary documentation is collected in a timely and organized manner.
Some payroll services also offer automated payroll systems, allowing employers to set workers’ pay and enabling employees to track their time if necessary. Once payroll is set up, the service will automatically process payroll on schedule without further intervention. Employees can enter their direct deposit information, and employers can link their business bank account, making the entire process run smoothly without needing to print or deliver paper checks.
If payroll isn’t automated, the employer is responsible for running it manually. This means entering worker pay amounts and scheduling paydays a couple of days before payday. While this may require more administrative effort, it offers greater flexibility for businesses that prefer to handle payroll on their own terms.
Many online payroll services include additional features that help you manage employee benefits within the same platform. They also often integrate with accounting software, making it easier to keep your financials in sync. Some platforms even offer payment cards for employees, allowing them to receive their earnings before payday and use the card to make purchases directly, streamlining cash flow for both employers and workers.
In addition to payroll functions, some payroll services are part of more comprehensive HR platforms that go beyond pay and benefits. These services may include tools for employee development, education, and coaching programs, offering a more holistic approach to managing your workforce.
How Do I Choose the Best Payroll Services for My Business?
When deciding what payroll software is best for your company, consider the nature of your business and what you specifically need. It is helpful to Use a Payroll Calculator to Estimate Costs you also need to ask yourself these questions:
1. What size is your business?
2. How many employees do you have?
3. Are your employees hourly or salaried?
4. How often do you pay your employees?
5. What is your budget for payroll software?
6. Who will manage your payroll calendar?
Laying out clear answers to how you run your payroll process is an important step in choosing payroll software. Certain plans are designed to meet the needs of different-sized businesses. If you are a small business owner, you may be best served by one of the companies in our Best Small Business Payroll Software of 2026.
You also need to consider the staff you employ:
• For hourly workers: Hourly workers may dictate the need for time tracking integrations to easily monitor the hours your employees are being paid for, whereas this may be less important for salaried employees.
• For contractors: If you strictly work with contractors, you may want to go with a company like Square or Gusto that provides contractor-specific options at discounted rates.
The number of employees will also affect the overall price of your payroll software. Pricing is based on a base monthly fee plus a smaller per-payee cost. This can add up quickly depending on the size of your company and should be factored in when deciding your payroll budget. Automated tax filing and HR services are also generally included in higher-tier plans and may be helpful to smaller HR and accounting teams.
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How Much Do Payroll Services Cost?
The cost of online payroll services varies widely depending on the brand and the number of features included. Most online payroll companies offer a range of monthly plans so businesses can choose the option that best fits their needs and budget.
Additionally, online services typically charge a lower rate than traditional payroll providers, making it an attractive option for small business owners.
Costs can range from $20 to $300 per employee per month, depending on the features included. With cheaper plans, businesses can access basic online payroll features, although other services may be available at an additional fee. Full-service payroll solutions will cost more.
Some systems include a global employer of record package for an additional fee. Employer of record means that the online payroll provider is responsible for filing the necessary reports and documents related to hiring employees in international jurisdictions.
This is essential for businesses that need to manage payroll in more than one country.
