The benefits of cloud-based payroll software for small enterprises
Accurate payroll processing is essential for a happy and motivated workforce. However, as a business grows, this task only becomes more complex and susceptible to errors. Navigating the intricacies of payroll can be daunting, especially for businesses without internal payroll expertise and experience — a situation that is quite common among small businesses.
That’s where payroll software can help. Cloud-based payroll software for small enterprises can help organizations simplify, streamline, and automate essential payroll processing tasks to ensure employees are paid accurately and on time.
In this blog post, we'll dive into the complexities of payroll management for small businesses, shedding light on the challenges they face and how payroll software can help. From maintaining compliance to reducing manual errors, here’s a closer look at why partnering with small business payroll systems can benefit your business.
Do small businesses need payroll software?
Not every small business will need software to pay employees accurately and on time. Those with a stable employee population, straightforward payroll structures, and the internal expertise, time, and resources may be able to manually run payroll on their own. That said, implementing payroll software can significantly enhance organizational efficiency and accuracy, while also helping your business save on the costs associated with manual processing, errors, and potential penalties due to non-compliance.
Other reasons to turn to a payroll solution? Business growth can come with its own collection of payroll challenges — like hiring employees in new states and countries, introducing new compensation structures, navigating changing labor regulations, and dealing with complex deductions. As your business grows, small business payroll systems can easily scale with your business and provide the external expertise, resources, and tools your business needs to succeed in its new chapter of growth. Of course, payroll platforms also allow businesses to connect their people and payroll data, unlocking the ability to automate manual tasks, improve data accuracy, and gain newfound visibility into budgets and expenses.
In short, while not all businesses may need payroll software, almost all can benefit from it. Businesses can leverage a payroll platform’s automation tools and technology integrations to reduce administrative tasks and free up employees to work on more strategic initiatives. Not only can software make it easier to enter and run payroll online, but it can also help businesses navigate tax and labor compliance, gain visibility into payroll and HR data, and pay employees how they want to be paid. Thinking a cloud-based payroll software for small enterprises might be right for your business? Check out our Executive’s Guide to HR and Payroll Software for Small Teams for expert tips on maximizing the impact of your future payroll solution.
5 benefits of payroll software for small businesses
While beneficial for businesses of any size, payroll software can be particularly advantageous for small businesses. Here’s a closer look at how the right payroll software can help optimize operations within smaller organizations:
It saves time
Payroll software allows your team to automate time consuming processes like manual calculations, data entry, and paperwork. Efficient payroll processing for small businesses can free up employees to focus on more strategic and meaningful tasks. This can not only drive productivity on your internal teams, but also improve employee job satisfaction and engagement.
It ensures compliance
Non-compliance can cost your business big, as fines from late or underpaid taxes, labor law violations, and improper leave administration can add up quickly. Payroll software can help companies expertly navigate compliance regulations to ensure local, state, and federal rules are followed to proactively avoid fines. Payroll software also maintains detailed records of payroll transactions, employee data, and tax filings, helping reduce the risk of errors, audits, and associated costs.
It improves accuracy
Manual payroll processes can be time-consuming, error-prone, and pose compliance risks. Payroll software, on the other hand, can mitigate these challenges effectively by ensuring your payroll data is updated in real-time with the latest employee information, time sheets, benefits allocations, and more. Since this information can automatically sync across your technology solutions, you don’t have to worry about someone on your team missing a number or checking an incorrect box.
It provides external expertise
While it’s normal for HR teams at small businesses to wear many hats, no one can expect them to know every local, state, and federal tax deadline and compliance regulation. Luckily, small business payroll systems stay up-to-date on evolving compliance changes so you don’t have to.
In-platform alerts and messages can let you know when items need your attention or when tax deadlines are approaching, so you can proactively address any regulation changes that may impact your business or file paperwork on time. Of course, if you have any specific questions or need additional guidance, your payroll provider’s team of payroll and HR experts are always around to help.
It scales alongside businesses
As businesses grow, payroll software can easily adapt to accommodate a larger workforce and evolving regulatory requirements. If your business needs to hire additional headcount quickly, you can rest easy knowing new employees can seamlessly join your organization and receive their first paycheck on time.
Key features of cloud-based payroll software for small enterprises
If you’re looking to invest in cloud-based payroll software for your small business, there are a few features and services to look for as you evaluate potential partners:
- Automated payroll calculations: By connecting your HR and payroll data, payroll platforms can automatically calculate employee wages based on hours worked, while seamlessly and accurately deducting benefit allocations and wage garnishments. This can reduce errors and allows all your data to work together.
- Tax compliance tools: Payroll tax software for small businesses should always include tax tools. From setting up automated filings to identifying paperwork errors to giving your business clear visibility into your compliance activity, these tools can ensure you never miss a filing deadline and make accurate payments each and every time.
- Employee self-service: One benefit of payroll software is it can empower your employees to self-serve, whether that’s viewing past paychecks or updating their personal/payment information. Many payroll providers even offer mobile apps to help employees self-serve while on the go or in the field.
- Leave management: Payroll providers can also help small businesses manage employee absences in one central location. Whether employees are taking parental, disability, military, or another type of state or federally protected leave, the right solution can enable employees to request leave of absences and help your business check eligibility and track employee time off. A solution like UKG Ready® Leave Manager can help your business ensure fair, consistent leave management while simultaneously mitigating compliance risk for your organization.
- Integrations with your existing HR technology stack: The biggest benefit of digitizing your payroll processes lies in the ability to let your data do the work for you. When evaluating software providers, make sure they can integrate with other solutions in your technology stack. For example, being able to sync your payroll and accounting solutions in real-time can give you better visibility into your company’s costs and cash flow.
- Reporting and analytics: Customer reporting dashboards make it easy to keep a pulse on your payroll practices. From tracking error rates to monitoring overtime pay by department, these charts and graphs can help you track key payroll metrics, identify trends, and make more informed decisions about your workforce and budget.
- Quality customer service: Issues arise at the most inopportune moments, so you’ll want to ensure you have a constant and reliable way to get the help you need and quickly resolve problems. Be sure to pick a vendor that has customer service on your preferred channels — whether that’s phone, email, chat, or video — as well as robust FAQs, tutorials, and help resources to help you self-serve, if needed.
Before you jump in to evaluating vendors on their tools and offerings, check out our article, Why the Perfect Payroll Starts with the Right Payroll Vendor. This blog has all the information you need and the questions you should ask to find the ideal payroll solution for your small business’ unique needs.
Common payroll pitfalls small businesses must avoid
Whether you choose to keep processing payroll manually in-house or partner with a payroll software, there are a few common payroll mistakes small businesses make that you’ll want to look out for. From failing to meet local, state, and federal compliance regulations to misclassifying employees, make sure your business remains vigilant to avoid these common pitfalls.
Ignoring data security
Employee payroll data contains personally identifiable information (PII), or data that can reveal someone’s identity. An employee’s name, bank account details, address, social security number, medical records, etc. are all considered PII and must be protected.
As an employer, you’re responsible for safeguarding your employees’ PII, whether by keeping this information under physical lock and key in a filing cabinet or by storing it safely in payroll software with advanced security features. Using the latter, your business can rest easy knowing your employee data is stored safely in one spot — not scattered across unprotected Excel documents on employee computer desktops.
Overlooking compliance changes
While compliance is always changing, so too is your business. If your organization grows rapidly and/or expands into new offices, states, or countries, it may be subject to new laws and regulations. As your headcount grows, so do your responsibilities as an employer. Luckily, a payroll provider can help you anticipate and proactively plan for any new compliance requirements as your business grows, so you don’t have to scramble to file last minute paperwork or offer additional benefits.
Neglecting employee feedback
Never forget your end-user. Your employees should be top of mind when you’re buying a new payroll solution, as an easy-to-use interface can make it easy for them to self-serve. After all, it’s in your business’ best interest to pick a software solution that your employees will actually use. That way, they can view past paychecks, update benefits allocations, and more all on their own, so your HR and payroll teams can spend less time on employee requests and focus on other strategic areas.
Misclassifying employees
Employee misclassification, or when a worker is incorrectly categorized as an independent contractor or vice versa, is a common issue that can affect businesses of all sizes, including small businesses. Unfortunately, even when well-intentioned, incorrect classifications can have significant legal and financial consequences. As a small business, you’ll want to ensure you properly classify your workers so that they receive the appropriate benefits, protections, and rights. If you’re ever in doubt, consult your payroll provider and/or seek legal or professional advice to ensure you’re correctly classifying your employees according to applicable laws.
Making manual errors
While DIY payroll may seem cost effective, it can actually be more expensive for your business. Without automation, manual errors can lead to expensive data inaccuracies, like if your team updates an individual’s address with the wrong zip code or adds an extra zero to an employee's recent raise. This can cause your business to underreport taxable compensation, make withholding mistakes, and fail to meet compliance regulations — all of which can come with costly fines.
Cultivating efficiency: The value of small business payroll systems
While not every small business needs payroll software to process employee paychecks, many organizations can benefit from having one. From automating tasks to helping navigate compliance regulations to reducing the risk of costly errors, payroll providers are a worthy investment that can save your business time, resources, and money in the long run.
Ready to start your search for the right cloud-based payroll software for small enterprises? Check out UKG’s Small Business HR & Payroll Resource Center for best practices, software purchasing guidance, and tools to help you choose the best payroll solution to grow your business. Or, take a tour of UKG Ready to see first-hand how our powerful tools can automate payroll and provide a best-in-class experience for your employees.
