Payroll Processing Services for Small Businesses. Your Ultimate Guide on the Best Solutions on the Market

Small business owners are constantly under the enormous stress associated with tax. Where larger corporations have power to escape the burden and cut costs here and there, SMEs are under so much pressure that there is absolutely no room for half-legal maneuvers to pay less tax.

One large part of tax comes from payroll. Hiring a worker adds to the tax burden significantly as every salary is framed with social security, medicare and income tax. Understanding how payroll processing works and finding the right partner to delegate these operations to is the secure way to stay compliant and spend only as much as is required.

Payroll processing is an umbrella term that encompasses all things payroll and even some degree of HR-services: from transferring money to employees to proper documentation to filing tax tax. In some countries employers are responsible for all the tax to be paid off of salaries; in others employees receive the gross amount and pay tax themselves.

Salaries, HR and closing documentation usually end up taking quite a bit of time that business owners and managers could devote to core business tasks. That’s why today there is a thriving market of payroll processing software to run payroll online securely and compliantly anywhere in the world.

As mentioned above, payroll has to do with tax. Some of it, regardless of where your business is, is to be paid by the employer. Failure to meet tax regulations is sure to cause intense interest on behalf of tax authorities. The potential restrictions against you range anywhere from a slap on the wrist to serious fines to severe criminal charges.

In the talent market today candidates are very picky when it comes to reputation. And reputation may very well get if not shattered, then at least tattered if it comes to be publicly known that your business is not transparent with tax.

Some small businesses go global, and payroll processing then becomes times more crucial than it is in businesses where operations are home-bound. Once a company enters a global market, it gets subject to scrutiny from at least 2 tax authorities: from their own country and from the destination. In this scenario, any mistake may bring your whole enterprise to an abrupt halt.

Learning the basics. With the help of a payroll software, you can actually understand the principle behind the payroll except you don’t need to lose resources on the path of trial and error. Delegating the payroll task to a full service partner means getting a professional assistant holding your hand through the process.

Saving resources. Hiring a professional to manage your payroll is great, but it basically means hiring once again — and further adding to your tax load and HR. Recruiting software that often comes with a personal manager saves money for small businesses while giving them the same full service.

Accuracy. The beauty of software in general is that it is almost flawless. It barely ever makes mistakes. Your payroll data must be orderly, easily retrieved and, if applicable, internationally acceptable. Today payroll processing providers are able to issue 100% compliant closing documents which means you won’t have to worry about legal.

Going paperless. Managing salaries paper-free is truly liberating. Not only are you able to cut the red tape and resources spent on it, but you are also unlimited in who you work with. International professional communities are open to you since payroll software can send salaries to your remote international employees or part-time workers.

Does software replace an actual human HR? Well, it depends. At times, you do need a human HR to manage payroll even through software. There may be varying payroll processing methods for different employees, and so a human eye on the process may help make the process smoother and more responsive to your case. Yet sometimes it is the founder that takes charge of the payroll software, and their expertise is quite enough to operate an online full service payroll software.

As you set out on a journey to find the right payroll processing software, guide your search with these questions.

Does it meet my business needs? There are multiple options out there on the market, some better tailored for SMEs than others. Most commonly, the basic question is how many employees you have now and how many you are looking to hire, if there is a need for it. The next big question is the scale of your payroll budget. Some big names, such as Deel, simply don’t work well with small startups or teams. Last but not least, is the basic payroll system enough for you or are there any specific features to your employment? If you have a team of regular staff and an outsource freelance team, these two teams will need separate payroll systems.

Is it scalable? As a rule, small business starts out as a handful of dedicated people, but the ambition is to grow. Switching payroll providers somewhere later down the road may be problematic, as it is a core business operation. So making the right choice at the onset is critical. Predicting (or simply asking) if the payroll solution can accommodate for a larger amount of employees will help you choose.

Is its UI intuitive? An intuitive UI means that a user doesn’t need a manual to carry out an operation. An intuitive software is always a bliss, as it further minimizes the risks of mistakes made by the person operating it.

Can I integrate it with my HRM? If you are just starting out, then probably you just don’t have the amount of people to manage with an HRM yet. However, proactively looking into integration features for later use is a smart move.

Is my data secure with this provider? Personal data is a highly sensitive matter. Governments issue laws to make businesses accountable for how they store data about its employees. Asking these questions upfront and checking the protocols of your payroll partner is a necessary step.

The diverse market for HR software never ceases to astonish. Today’s choice is extremely wide, and finding a platform to best suit your needs has never been easier. Though the number of solutions for HR management and payroll processing may seem overwhelming, it only works for the benefit of SMEs.

There are three types of payroll solutions that are most commonly distinguished.

A PEO is the most uniform solution for HR and payroll. Small companies outsource their payroll management to PEO partners. By partnering up with a PEO, you are able to delegate benefit management to a third-party which will manage the process for you.

PEOs weigh more in terms of leverage for insurance and other benefits as they normally pool multiple small staff teams into a single super-entity. PEOs also take the responsibility off of your shoulders, as technically it is the PEO that employs your workers, so the PEO is now in charge of compliance management, payroll processing and tax.

The name describes it all. It is a software that helps send salaries to workers but its HR-related functionally is rather limited. In fact, the competitive edge of all payroll platforms is that it caters exclusively to payroll management. There is no HR-oriented arsenal, and most of the time it is all that is really required by SMEs.

Standalone payroll platforms provide a necessary level of compliance regardless of where you pay — whether it is at home or to remote teams abroad, you and the receiving party will be provided with closing documents to declare spending and income.

This is a perfect mix of payroll processing capabilities and sufficient HR-management functionality. They are also called Human Resource Information Systems (HRIS). With an HRIS you can not only administer salaries but also facilitate recruiting, onboarding and performance management solutions.

The solution is designed for SMB and Enterprise. HRIS (SMB) is not as scaleable, and its customization potential is not as strong. The top greatest number of employees it can accommodate is 250 people. HRIS (Enterprise) is designed to support an employee from the day they join the company to the time they retire. They are configurable to meet business needs and respond to internal rules and regulations. However, they may be more challenging to implement and more costly overall.

ADP TotalSource. The tool pretty much covers the needs of an SME as it offers payroll, benefits and HR outsourcing services. As an American provider, ADP is able to respond quickly to any change in federal, state or local law. It also has a retirement plan to provide secure employment for workers.

• Let’s talk money. No uniform quote.

Papaya Global. The tool is highly scalable. Present in more than 160 countries, it helps manage payroll and benefits, and Papaya Global also offers independent contractor compliance and business intelligence reporting. Basically, you are able to see how your company’s money is spent. The tool is one of the best solution for the global workforce.

• Let’s talk money. With a minimum of 101 employees, the initial monthly fee is $25 per employee.

Paychex PEO. The tool has you covered with comprehensive payroll services. Online and mobile payroll, regulatory compliance and benefit management (retirement and health plans) are manageable through a single account.

• Let’s talk money. No uniform quote.

Justworks. The variety of services offered is impressive - it’s HR consulting, PTO management, off-cycle payments and employee benefits. While its initial charge is on the higher side ($59 per employee), it reduces as you grow. Businesses are only billed for the W-2 employees per month.

• Let’s talk money. $59 per employee.

AlphaStaff. The superpower of the tool is risk management. It provides pay-as-you-go compensations for workers and helps stay compliant with Occupational Safety and Health Administration (OSHA).

• Let’s talk money. No uniform quote.

Workday. The tool is a helpful instrument when it comes to unifying information in one place for a medium-sized business. Its integration capabilities unite all HR aspects, including payroll, benefits, talent management, workforce planning and employee experience. The approach guarantees consistent data, reduces redundancy and simplifies HR processes.

• Let’s talk money. Currently their per employee per month charge is $ 32−42.

Oracle HCM. The platform helps achieve efficient full-scale workforce management throughout the entire employee lifecycle. The strategic approach behind Oracle HCM reduces manual labor and mitigates risks of errors.

• Let’s talk money. The cost per employee is $ 15 per person per month. The minimum purchase is 1,000 people and the minimum contract is 3 years.

Paylocity. It’s an all-in-one HRMS software that helps companies overcome their HR and payroll challenges. Its core expertise is in payroll: tax filing, wage garnishment, and expense management. The platform is also equipped with workforce management tools (e.g. attendance and employee scheduling) and talent management (from recruiting to LMS).

• Let’s talk money. Its per employee per month subscription is $ 22−32. In addition, there is a one-time implementation fee which may be up to 20% of the annual software fees.

EasyStaff. The service is both convenient and effective making SMEs unlimited in their search for talent. EaysStaff caters to any country in the world, so paying your remote teams or freelancers is only a matter of a couple of clicks. Businesses work with a B2B partner through a service agreement, and EasyStaff pays their workers. Companies are provided with closing documents to declare spending, and EasyStaff handles all things legal.

• Let’s talk money. EasyStaff charges a commission off of the amount of money sent. The baseline is 6%, and factors like payout method influence it.

Oyster. The service is known primarily as a standalone payroll solution but it also offers some benefit administration as well as workforce management capabilities. Oyster provides discounts for teams of 5 and more, and its customer support is multilingual.

• Let’s talk money. Pricing depends on who you are working with. For freelancers and contractors the fee is $ 25 per person per month. For employees it is $ 599 per employee per month.

Remote. This platform simplifies managing payments and taxes for a wide range of workers in over 200 countries, all at an affordable price. Remote also goes above and beyond by providing free HR management tools and special pricing for nonprofits and new businesses.

• Let’s talk money. The basic charge is $ 50 per employee, and custom plans are available for larger enterprises.

As we were writing this article, we consulted several online resources that contain relevant information on payroll processing software.

• G2 is a heavily moderated review website which has become the #1 destination for software users that want to know the general opinion on a solution they are planning on using. G2 is centered around SaaS, and its expertise, gathered through thousands of reviews that software users leave there, can guide you through the market of full service payroll solutions.
• Forbes offers both their own selections and rating lists based on public opinion. If you are looking for more in-depth content on a software of choice, then Forbes is the right place to check.
• TrustPilot is a well-known online review website that has been around for quite a long time. Reviews that you may find on TrustPilot are likely to complement what you find G2 so that you have a fuller picture.

• Small and medium businesses are under enormous pressure when it comes to taxes. While they need to stay compliant, they also need to find money to cover all payroll costs.
• The budget-friendly path to compliance lies in outsourcing HR and payroll-related operations to payroll processing providers.
• Depending on the size of your business, you can find the right provider to meet your budget and needs.
• When selecting a payroll processing software, pay close attention to its features and scalability extent. A payroll management software is not supposed to curb your growth whether you grow at home or extend globally.

- Arina Kozlova, Head of Customer Success


June 25, 2024