Manual Payroll vs. Payroll Software
Manual payroll management places a huge responsibility on accountant teams as they will have to keep a dozen records and files of every leave, deduction, bonus, or performance fluctuation. Errors and miscalculations are also bound to happen when calculations are done manually, resulting in late payments, losses, missed or unpaid taxes.
These errors can also result in violating compliance laws and regulations, which leads businesses to be fined by the IRS with huge amounts of money.
On the other hand, payroll software can automate most of the manual payroll processes and give you ease of mind when it comes to calculation errors or violations. Payroll software has advanced to great measures, some of which are its abilities to unlimited payroll runs for separate employee types and different wages in mere minutes.
Let us discuss the differences between manual payroll and payroll software.
Advantages of manual payroll
The advantages of manual payroll are limited compared to payroll software. Manual payroll only:
- Saves you money
- It gives you an in-depth understanding of the process
Running your business’s payroll manually will cost you way less than subscribing to monthly fees of payroll software. For small businesses, one hired expert or accountant could do the job just fine, but perhaps it will get costly if you need to bring in a payroll professional in the eleventh hour for any changes.
Moreover, manually performing payroll will give you a deeper understanding of its processes, payroll taxes, employee benefits, and compensation matters.
Disadvantages of manual payroll
The drawbacks of manual payroll outweigh its benefits, as you will have:
- Increased risk of human errors
- No compliance backstops
- Time wasted
Human errors and miscalculations are bound to happen in manual payroll processing; a misplaced number or zero can result in great losses, and missed tax payments can result in fines and financial hardships.
In addition, if you put the whole payroll processing in the hands of one person, and they get a tax withholding wrong or incorrectly exempt a fringe benefit from taxes, you will be led to great costly problems when federal and state tax authorities start knocking on your door.
Lastly, manual payroll processing is way more time-consuming than using payroll software. The hours of manual work can be achieved in seconds with payroll software.
This leads us to payroll software’s advantages and drawbacks.
Advantages of payroll software
Payroll software is any business’s best bet for error-free payments and fast processing. Payroll software, though, offers more than that; you also get:
- Document management
- Report and analytics
- Tax compliance
- Expert support
- Benefits administration
Payroll software provides businesses with a cloud-based document management platform that business owners and employees can access for self-serving and retrieving their documents and tax forms. Document management will keep all employee files safe, organized, and ready for retrieval at any time.
Unlike manual payroll, payroll software will ensure businesses stay compliant and updated with all local, state, and federal laws and regulations, and some of the best payroll software also offer to reimburse owners in full if they get fined by the IRS for violations while using their software.
Moreover, payroll software also provides employees a benefits administration portal where they can easily access their benefits plans, adjust their contributions, and have clear information regarding their benefits.
Last but not least, payroll software can generate several kinds of reports and provide owners with analytics over key metrics or payments in the case that investors or lenders ask for them.
There are many more benefits that payroll software can offer your business; you can read about them in our blog about how payroll software can benefit your business.
Disadvantages of payroll software
The main drawback of payroll software is its costs. Although there is free payroll software available on the market, their advanced features are usually limited to paid subscription plans, where you will have to pay a definite monthly amount plus another fee for every employee or user.
Before we go on and recommend you some of the best payroll software on the market, let us show you some signs you need to be wary of to make the change from manual payroll to software.
1. You have over five employees
Manual payroll becomes less justifiable as your business has more employees. Calculating taxes, benefits, and wage types will become a heavy load on you or your accountant that could result in costly consequences.
2. You have different employee types
Suppose you have more than one employee type: part-time, free-lances, and full-time; their wages will need different calculation methods depending on their working hours and pay rates. Performing these wage or tax calculations on Excel will not give accurate results and could be complicated to perform.
3. You are spending too much time on payroll
As your business grows, the more employees it will have, you will be spending more time doing payroll. You should never compromise the time taken to do payroll for the sake of other operations, which is why you should invest in payroll software that can save you precious time, as it can do payroll in seconds so you could use your hours on other important matters without any compromises.
Paychex is our top recommendation for one of the best payroll software on the market. It provides businesses with a fully-featured inclusive platform that can automate payroll processes, tax filing, and all calculations. In addition, it also offers the following:
- Time tracking software
- Employee Benefits Administration
- Reporting and Analytics
- Employee Screening
- Employee Onboarding
- Employee Handbook Builder
- Learning Management System
- Mobile Application
Paychex offers three subscription plans for its payroll software:
Paychex Flex Essentials - $39/month, + $5 per employee
Paychex Flex Select – Quote-based
Paychex Flex Pro – Quote-based
Each plan comes with a set of features, and you will need to contact Paychex’s team to get a price for the last two plans, which will be tailored to your business’s size and needs.
2. Intuit QuickBooks
QuickBooks is our second recommendation for one of the best payroll software. You may recognize QuickBooks as one of the best accounting software out there, as it seamlessly integrates with most if not all business systems and software.
QuickBooks also offers payroll software, which also integrates with its accounting software. QuickBooks can automate all your payroll processes and provide you with the following:
- Mobile payroll application
- Automated payroll runs
- Automated federal and state tax filing and payment
- Time tracking software
- Project management tools
- HR solutions
- Compliancy alerts and law updates
QuickBooks associates its accounting software with its payroll subscription plans, so you get the two at great prices:
Payroll Core + QuickBooks Simple Start - $70/month + $4/month/employee
Payroll Core + QuickBooks Essentials - $95/month + $4/month/employee
Payroll Premium + QuickBooks Plus - $155/month + $8/month/employee
3. Toast Payroll
Our last payroll software-recommendation goes for Toast. Toast is specialized in providing restaurant-type businesses with a feature-rich point-of-sale system that streamlines all their operations and helps them grow.
Toast associates its payroll software and team management tools with its point-of-sale system. Its payroll software can automate your payroll runs, calculations, payments and ensures your business stays compliant with federal and state labor laws and regulations.
As for the subscription, you get payroll software with the following point-of-sale plans:
Essentials Plan - $165 per month
New Restaurant Basics - $110 /month + $4 per employee/month
Custom Plan - Quote-based