The Best Online Payroll Services of 2020

Online payroll software encompasses a lot of services. These are some of the most valuable features and services these programs offer.

Payroll Processing

The primary purpose of these services is to process payroll. This is how your employees are paid. Based on the wage rates you enter and the hours each employee worked, the system automatically calculates how much they should be paid. It applies the appropriate deductions for each employee into account, such as medical benefits and Social Security.

Payroll Tax

One big plus of using an online payroll service is that it handles your business's payroll tax responsibilities. Based on each paycheck, the software can withhold the required employee taxes. The service then fills out and files the quarterly payroll tax reports and pays the appropriate local, state and federal agencies.

At the end of the year, the software generates the W-2 and 1099 tax forms for each worker. Many payroll companies offer an error-free guarantee. This means that if it makes an error on your taxes, your payroll provider will correct the mistake and pay any fines or interest it incurred.

New-Hire Reporting

Each time you hire a new employee, you are required to report that information to the state. Online payroll services can complete those forms for your business and send them to the proper state agencies. Information on the forms includes the employee's name, address, and Social Security number, as well as the employer's name, address, and Federal Employer Identification Number.

Pay Options

Payroll companies offer multiple ways to pay your employees. The most convenient option is direct deposit. With this method, an employee provides their bank account information, and the payroll software automatically deposits the paycheck into their account on payday.

Another option is paper checks. Some payroll providers offer check-stuffing services. They will print the checks, stuff them in envelopes and then deliver the envelopes to your office to be given directly to employees.

A third option that some payroll services now offer is prepaid debit cards. The money from each paycheck is automatically deposited to each debit card. The employees using the payroll cards then have instant access to the funds.

Employee Types

With online payroll software, you can pay all types of employees. The software can process pay for full- and part-time W-2 employees as well as 1099 contractors, including consultants and freelancers. The software treats both types of employees the same in terms of payment and reporting. All employees are stored in the software; oftentimes, both types of employees can log in to the system to access their payroll records.

Reporting

Online payroll software can provide businesses with a wide range of payroll reports. These reports can give you better insight into your company and employees. The types of payroll reports that some services offer include payroll registers, contribution reports and payroll tax reports.

Integrations

A lot of online payroll software includes integrations with programs many businesses already use. These include accounting software, time and attendance systems, and human resources software. These integrations allow the two programs to seamlessly connect – data is automatically shared and transferred between the two. This saves you the time of entering the same information in multiple places.

Employee Self-Service

Each employee has their own login to access the software. The employee portal allows them to review their digital paystubs, access their year-end tax forms and check their time-off balances.

Mobile Access

Some payroll services provide mobile access to their software. Some have mobile-friendly websites, while others have a dedicated mobile app for iOS and Android devices, allowing you and your employees to access all the same features wherever you are.

PTO Management

Many payroll services include some level of management for your employees' paid time off. This may mean simply tracking PTO accruals, or it may also offer the ability for employees to request and managers to approve or deny time off.

HR Features

Some payroll companies include human resources services in their platform. These can include employee onboarding services and tools to create employee handbooks or job templates. Some payroll services even offer on-demand HR consultations.

Customer Service

Online payroll companies offer a variety of customer support options. With some, you have a dedicated support representative assigned to your company. This is your go-to person for any issue that requires a call. Other payroll services just have a general support number that you call for help. Most companies offer customer support Monday through Friday, though a few have support available over the weekend. In addition to the in-person support you can receive, most online payroll services have extensive resources on their websites such as how-to-guides, FAQs and videos.

Added Services

In addition to the core payroll functions, many payroll companies offer a litany of other services that you can tack on to your plan. These include workers' compensation insurance, benefits administrations, retirement plans, college savings plans, and time and attendance systems.

What should we look for while deciding the best payroll software for our organization?

There are various factors to consider when choosing a payroll service provider. The most important factor is whether it can serve your company's needs. Does it make it easy to manage your entire employee roster? Can you run payroll as often as you like? Does it handle all of your payroll tax needs? Does it offer a tax guarantee? Does it provide the added services you want, such as workers' compensation insurance and PTO management? These are all things you need to know about a service before committing to it.

Other factors you want to consider are whether it fits in your budget, how easy the online payroll software is to use and the level of customer support.

What are the benefits of the best payroll software?

There are many benefits to using online payroll services. First, it makes the process of running payroll simple. These services handle all of your payroll processing and payroll tax responsibilities. All you, as the business owner, are responsible for each pay period is entering the number of hours each employee worked and any commissions or bonuses they earned. You should be able to run your payroll in just a few minutes.

Once you submit, the payroll software does the work for you. It calculates the correct amount for each paycheck and deposits that money directly into your employee's bank account. If they don't use direct deposit, it will let you know when you can print out a paper check for them. The software also automatically calculates the proper payroll tax withholdings and, when the time comes, files the required paperwork and makes the necessary payments on your behalf.

Payroll software also offers employee self-service. Instead of employees asking someone else all of their payroll questions, they can log in to the system to get the answers they are looking for on their own. This also saves time for those who would be answering their questions to work on something else.

What criteria did you use to compare payroll software solutions?

We looked at a variety of factors when determining our recommendations. We considered the cost of each service, how easy it is to use, what tax services it offers, the integration options, whether there are any incentives like free trials or discounts, if self-service is available, how complete the tax services are, extra services (such as HR, time-off management and retirement savings plans), the customer support, and Better Business Bureau ratings and complaints.

What are the top payroll software solutions for payroll service providers and accountants?

After careful research and consideration, our top payroll service selections are Intuit, OnPay, Gusto, ADP and Paychex. Other highly rated services include SurePayroll, Sage, APS, BenefitMall, IOIPay, MyPayrollHR, Fuse Workforce Management, PrimePay and PayUSA. To learn more about each service, check out our reviews above.

Are there free payroll software options? 

Yes, there are a number of free payroll services available to small businesses. Some limit the number of employees that can be paid, while others have restrictions on the features and tools included with the software. 

Payroll4Free.com, for example, offers its basic service at no cost, as long as you are paying less than 25 employees. However, it doesn't include all of the services and tools you will find with a paid option. 

If you plan to use a free payroll service, investigate exactly what the free service is offering and make sure it fulfills all of your needs. 

When does it make sense to outsource payroll? 

Most small business owners don't have an extensive financial services background, and they are pressed for time; therefore, hiring experts to handle some of these critical aspects of running a successful business is usually wise. 

You can't afford to make a mistake with payroll. Not making accurate or timely payments to your employees causes big problems with your staff. You don't want to lose your employees' trust by messing up their paychecks. 

Additionally, if you do not pay, or if your underreport, your payroll taxes, you will likely face significant fines from the government. Spending the extra money to use an online payroll service will likely be more cost-efficient than paying penalties to the IRS and state tax authorities.

How long does payroll take to process?

The amount of time it takes to process payroll depends on your method. If you manually track employee hours and earnings, it can take you the entire week to process. However, with an online payroll service, you could save time and complete your payroll within hours. 

How much do accountants charge for payroll services?

If you're looking to use accountants to manage your company's payroll services, you have two options – a general accountant or a certified public accountant. According to a 2018 survey by the American Institute of CPAs, certified public accountants charge about $160 to $275 per hour. According to the U.S. Bureau of Labor Statistics, an accountant's services can cost you $34 an hour, or more than $70,000 a year.

What is meant by 'payroll company'?

A payroll company, also known as a payroll service, helps employers pay their employee on time and within compliance of the law. This service takes care of all the payroll responsibilities of its client company. In other words, a payroll company is meant to relieve employers of all the work required to pay their employees accurately and on time.

To determine the best payroll services for businesses, we started with a pool that included each service on the comprehensive list below. After some preliminary research of other best-pick lists, we interviewed small business owners to discover new ones to add to our list. Overall, we conducted our initial research on more than 70 payroll services.  

We settled on 22 payroll services to consider as best picks: ADP, AmCheck, APS, BenefitMall, Big Fish Payroll Services, Fuse Workforce Management, GetPayroll, Gusto, Intuit, IOIPay, MyPayrollHR, OnPay, Patriot Software, PayUSA, Paychex, Paycor, Paylocity, Payroll On A Budget, PrimePay, Sage, SurePayroll and Wagepoint. 

Next, we conducted a more in-depth review of each service. We studied their websites and offerings, watched tutorials and how-to videos, read user reviews, looked at Better Business Bureau ratings and complaints, and tested out services when demos were available. After narrowing down the list to 14 contenders, we contacted each company posing as business owners to evaluate their customer service. 

We analyzed each service based on the following factors:

• Cost
• Tax services
• Ease of use
• Customer service
• Integration options
• Tax guarantees
• Mobile accessibility
• Payroll reports
• Employee self-service
• Extra services (employee retirement plans, workers' compensation, etc.)
• Ratings and complaints

A growing number of businesses find value in outsourcing their payroll. Today's payroll services handle several critical, time-consuming tasks, including processing payroll and calculating, filing, and paying payroll taxes. 

Outsourcing payroll not only helps prevent errors but also frees up employee resources. A recent report on the payroll industry by IBISWorld shows that there are more than 300,000 payroll and bookkeeping businesses in the United States that employ more than 900,000 people.

Overall, payroll and bookkeeping businesses generated $79 billion in revenue in 2017, up 5.6 percent over the previous five years.

"The industry has experienced steady growth over the five years to 2018 as clients increasingly subcontracted back-office administrative activities to take advantage of strengthening economic conditions, enabling them to focus efforts on core business functions," the report's authors wrote. "By outsourcing payroll and bookkeeping, small businesses can save time and money, freeing up resources for higher-priority pursuits."