Are you also noticing that modern payroll platforms are racing to stand out by adding new and innovative features to their products? While having more features sounds great to a customer, it can sometimes be an inconvenience.
More features mean higher payroll software prices, which might be justified for a large enterprise but not for a smaller one. Not to mention, too many features can complicate the product and detract users from its main functionalities.
This article provides a detailed list or roundup of essential features that payroll software should have to effectively meet business needs.
12 Key Payroll Software Features
Here’s a list of 12 features that are considered must-haves in a great payroll and benefits platform.
- Automated payroll
- Benefits management
- Time tracking
- Tax filing
- Legal compliance
- Payment & direct deposits
- Employee self-service portal
- Mobile and desktop applications
- Analytics & reporting
- Payroll integration
- User management & data security features
- Payroll customization
Although the features we’ve listed solve various payroll problems, they’re not critical for every business type.
So, how do you determine which features are more useful than others?
Let’s add more context to our discussion by evaluating the core payroll software features for different business types.
Key Payroll Software Features for Small Businesses
If you’re a small business owner, cost optimization and process efficiency are probably among your biggest payroll concerns. Thus, automated payroll processing, time and attendance, and tax filing and legal compliance are among the most important features of payroll software for your small business.
1. Automated Payroll Processing
Automation should be among the top considerations when choosing payroll software for your small business. Recent payroll data found that 94% want to reduce manual payroll handling by leveraging technology and automation.
Modern payroll software automates time-consuming processes by integrating your HRIS and accounting software, minimizing manual data entry. It automatically calculates employee wages based on working hours, overtime, bonuses, and commissions. It also calculates payroll taxes and streamlines operations like updating records, and payment disbursement.
This not only frees up your resources but also reduces manual errors and inefficiencies in your processes, ultimately reducing the overall cost of payroll.
2. Time And Attendance Tracking
Did you know US businesses lose over $11 billion annually because of time theft? On the other hand, employers rob their workers of an estimated $22 billion by manipulating attendance records every year.
This is why an automated time-tracking system linked directly to your payroll software is a critical feature for both employers and employees.
Most modern payroll services have built-in time-tracking functionality. Those that don’t, usually integrate with standalone time and attendance software.
This feature not only increases your payroll efficiency but also minimizes wage-related disputes that arise because of timesheet discrepancies.
3. Tax Filing & Legal Compliance
Managing employee tax forms and ensuring legal compliance can be challenging for small businesses that are already stretched thin on time and resources.
This is why it’s critical to use a payroll solution that handles tax calculations, prepares relevant records, and ensures your policies follow the applicable laws.
4. Employee Benefits Management
Payroll software can also simplify benefits administration for small business owners. It provides a unified platform to manage all employee benefits, including health insurance, retirement plans, and other perks from an integrated system.
It automatically applies perks and benefits to the relevant employees depending on their designation, department, or any other criteria you define.
For example, you might want to offer benefits insurance to employees from a specific department only. The right payroll providers allow you to do that through conditional benefit management features.
5. Flexible Payment Management
Numerous studies indicate a strong statistical relationship between employee job satisfaction and monetary compensation.
So, if you want to retain your employees longer and keep them motivated, paying them on time in their preferred modes is a great way to do that.
Payroll software can simplify this by automating your payroll payment process. It can schedule direct deposits to employee bank accounts or digital wallets and print paychecks.
These are accurate payments calculated directly from your payroll system integrated with your employee database and time-tracking tool.
Must-Have Payroll Software Features for Mid-Sized Businesses
For mid-sized businesses, investing in a payroll solution is a strategic decision. Payroll software not only helps these growing businesses optimize costs and improve process efficiency but also allows them to manage various payroll types without dedicating additional resources.
Apart from core payroll functions, here are some features you should consider when purchasing payroll software.
1. Payroll & Benefits Management
Running payroll and managing benefits for multiple employee types is challenging for mid-sized businesses.
Wages and payroll cycles differ among full-time, part-time, and freelance employees. Moreover, new inductions and employee turnover add complexity to workers’ compensation and benefits calculations.
However, any payroll solution not only simplifies these calculations but also frees up valuable resources you can invest in other high-priority tasks.
2. Integration With HR Systems
Managing employee data, timesheets, payroll records, and other critical information in separate disconnected databases results in multiple process inefficiencies.
For example, human resource teams need to tally information from databases for payroll processing. Similarly, any changes to a database need to be manually updated to avoid discrepancies.
So, it’s critical to choose payroll software that combines all your HRMS and becomes the single source of truth for all your payroll processes.
To ensure effective payroll system implementation, your software should either have the required features natively or be able to integrate with your existing HCM systems.
3. Compliance Management
Inaccurate data and unintegrated systems not only impact process efficiency but also lead to compliance issues.
As a business owner, you must invest in payroll software that solves these problems.
It should not only ensure consistency across your data sources but also help you comply with ever-changing employment regulations.
This is crucial because mid-sized businesses often hire remote employees or offshore workers in different states to optimize costs and utilize the best talent (EOR providers are a good option in this situation).
Without software that actively ensures legal compliance, you may face issues with regulatory agencies.
4. Payroll Customization
Payroll software features are designed for the most common use cases. However, mid-sized businesses usually need to tailor payroll functionalities to their specific business requirements.
This is why you should look for a flexible and customizable payroll solution you can alter as needed.
For example, you may want to set different pay rates for various job roles, departments, or individual employees. Or you might have variable rules for employee reward programs, commissions, and other incentive-based pay for different organizational functions.
Your payroll management system must be equipped to handle these unique scenarios and allow you the flexibility to modify its features to your needs.
Top Payroll Software Features for Large Enterprises
Multinational companies and large enterprises with thousands of employees have advanced payroll requirements. They have well-documented processes and policies for all aspects of their business, including payroll management.
Payroll software for large companies must make it simple to implement those policies and ensure compliance across the board.
This is why you should look for the following payroll features for your organization.
1. Global Payroll Management
Managing payroll for a global workforce has multiple challenges. Every country has unique employment regulations and tax laws. Complying with them is a tedious task that requires a dedicated legal team.
Similarly, regular payroll operations like paying employees in their own currencies, navigating local banking issues, and processing payments on time are much more challenging when your workers are spread in different countries and regions.
Therefore, your payroll solution should be designed to handle payroll for a global workforce.
The global payroll software must have the features, tools, and functionalities to ensure legal compliance, file taxes, and make direct deposits and digital payments in multiple countries.
Look out specifically for software that offers localized employee benefits and perks that align with the relevant labor laws.
2. Mobile App & Employee Portal
For an organization with a large and distributed workforce, it is vital to provide employees with an interface to directly manage their payroll-related information, generate requests, and engage with the relevant departments.
So, the payroll solution you choose must have a robust mobile application with separate interfaces for you and your employees.
A typical employee portal allows employees to download and upload relevant documents, apply for leaves, provide feedback, and withdraw payments to their bank accounts.
Mobile-based employee portals make your payroll processes more inclusive and give employees greater control over their information funds.
3. Advanced User Management
Data security is among the biggest concerns organizations have when using enterprise payroll software.
Uploading all your critical payroll data and integrating your key HR systems with payroll software poses security risks.
This is why you should only invest in payroll solutions with adequate security and privacy features.
Features such as advanced user management allow you to define access levels for various user types, ensuring no irrelevant users can view or edit your data.
Similarly, data encryption, backups, and login security are critical features for safeguarding your payroll information.
4. Analytics & Reporting
Detailed analytics and payroll reports are among the most useful payroll software features for large enterprises. Processing payroll for thousands of employees in dozens of departments located in multiple countries means it’s easy to lose sight of the bigger picture.
In-depth analytics give you a birds-eye view of your payroll expenses, helping you understand where your resources are going and enabling informed decision-making.
Overrated Payroll Software Features
Some payroll software overhype features that have little utility in real life, such as performance management tools, social media & community tools.
1. Performance Management Tools
Some cloud-based payroll software also offer basic performance management system tools. However, they’re add-ons that only allow for superficial performance management and aren’t robust enough for modern organizations.
It makes more sense to invest in a bespoke performance management platform since it is a key aspect of employee management.
2. Social Media & Community Tools
Many payroll software systems offer community features like chat rooms, social media integration, and other ways employees can engage with each other.
However, these can be counterproductive features because they often distract employees from their core functions and may result in controversial discussions that should instead be held privately.
Factors to Consider When Choosing Payroll Software
Apart from the features we’ve discussed so far, here are some of the other factors you should consider when choosing payroll software for your business.
Alignment With Business Goals
The most important consideration is whether a payroll software solution fulfills your business needs. Look beyond individual features and see if the tool is actually designed for your business type.
Some payroll software and tools are designed for specific markets. These niche payroll solutions may focus on businesses only up to a certain size, or cater to specific industries or locations, such as Canadian Payroll Software and Trucking Payroll Software.
Make sure the one you choose fulfills your immediate and long-term needs.
Pricing
Most payroll software pricing is based on the number of user accounts in your company, plus a fixed monthly fee.
For organizations with large HR and payroll teams, this can add up to a significant annual expense. So, you must carefully create a payroll budget and compare it with the pricing models of different payroll solutions before making a purchase decision.
Scalability
Switching payroll software consumes significant time and resources. This is why it’s crucial that you choose a solution that scales with your business, so you don’t need to look for other options.
Consider if a payroll solution, or even better, a solution that can handle both HR and payroll, can support your organization's annual, five-year, and ten-year plans.
Customer Support
Processing employee payroll, managing benefits, and ensuring compliance are technical operations that any top payroll solution can handle. However, you still need assistance from time to time in handling the tool and tailoring its features to your needs.
So, when choosing payroll software, consider the level of support they offer in different situations.
Is their support limited to FAQs and help articles? Do they have dedicated payroll professionals on the team who can jump in to handle complex issues when needed?
