What is payroll management software?

Payroll management software automates the entire payroll process including calculating employee wages, withholding taxes, processing direct deposits, generating pay stubs, filing tax forms, and maintaining payroll records. It ensures accurate and timely payment to employees while maintaining compliance with federal, state, and local tax regulations.

How much does payroll software cost?

Payroll software pricing typically ranges from $40-150 base fee per month plus $4-12 per employee per month. Basic plans for small businesses start around $40/month plus $6/employee. Full-service solutions with tax filing and HR features range from $100-150/month plus $8-12/employee. Additional costs may include setup fees ($100-1,000), year-end processing ($100-500), contractor payments ($5-10 per payment), and multi-state processing fees.

What features should payroll software include?

Essential features include automated wage calculations, tax withholding and filing, direct deposit processing, pay stub generation, time and attendance integration, PTO tracking, benefits deductions, year-end tax form generation (W-2, 1099), multi-state tax support, employee self-service portal, mobile access, garnishment processing, reporting and analytics, and compliance alerts. Advanced features may include international payroll, contractor management, and predictive analytics.

How does payroll software ensure tax compliance?

Payroll systems maintain compliance through automatic tax calculation based on current federal, state, and local rates, electronic tax filing and payment, automatic form generation (940, 941, W-2, W-3), multi-jurisdiction support, quarterly and annual reporting, garnishment compliance, new hire reporting, and regular updates for tax law changes. Many providers offer tax penalty protection and will cover penalties resulting from their calculation errors.

Can payroll software handle multi-state employees?

Modern payroll platforms fully support multi-state payroll processing by automatically calculating state-specific taxes, handling reciprocal agreements between states, managing multiple state unemployment insurance accounts, filing in multiple jurisdictions, tracking work location changes, and providing state-specific reporting. Premium plans typically include unlimited state support, while basic plans may charge per additional state ($10-30 per state per month).

What is the difference between basic and full-service payroll?

Basic payroll software calculates wages and generates reports but requires you to submit tax payments and filings manually. Full-service payroll handles everything including automatic tax payments, federal and state tax filing, year-end form preparation and filing, new hire reporting, and compliance monitoring. Full-service also typically includes tax penalty protection, dedicated support, and handles corrections. The cost difference is usually $2-5 per employee per month, making full-service a valuable option for most businesses.

How long does payroll software implementation take?

Implementation typically takes 2-6 weeks depending on company size and complexity. Small businesses with straightforward payrolls can be up and running in 2-3 weeks. The process includes employee data entry, tax setup for all jurisdictions, benefits and deductions configuration, time tracking integration if needed, historical data migration for year-to-date reporting, and testing with a trial payroll run. Most providers offer implementation support and training to ensure smooth transition.