Payroll Processing: What It Is, How to Do It Properly & 5 of the Best Tools

In this article, we’ll look at the basics of payroll processing. We’ll also introduce five of our favorite payroll processing tools to help you find your perfect match. Let’s dive right in!

What is payroll processing?

If you run a business, you probably spend a lot of time issuing and processing paychecks. From supporting your employees’ personal finances to making sure you don’t accidentally overpay anyone, you may struggle to cover all your bases. This is where payroll processing comes in.

Payroll processing is the systemic approach to your finances. It involves several steps and checks to help you calculate the exact amount of cash you need to be paying. This is important if you want to account for things like taxes or health insurance compensation.

How does payroll processing work?

As with most things, payroll processing will likely be different from organization to organization. Nevertheless, there are four general phases you’ll probably have to deal with when taking care of your payroll:

• Phase one: Employee information. First, you’ll need to gather the necessary data from your workers. This normally includes bank information, insurance forms, and relevant tax forms. You may also need to collect information on their working hours if you stray from the typical two-week pay period.
• Phase two: Relevant approvals. Your company may want to verify that each employee has worked the hours they’ve reported. This might come from an electronic monitoring system or pre-made time sheets.
• Phase three: Taxes and benefits. You’ll then want to make sure that each employee’s deductions are accounted for. This includes federal and state taxes, contributions towards retirement, and any other factors that will affect their final paycheck.
• Phase four: Recording your payroll. Finally, employees will receive their paychecks. You’ll need to retain records of this information in case it becomes necessary in the future. You can also use any data to create detailed analytics about your payroll process.

As you might imagine, this can be a difficult process to do by hand, especially if you’re running a big company. Therefore, a powerful tool can be your best friend. Choosing the right payroll processing program can help you keep accurate records with ease.

The best tools for payroll processing in 2021

Here are some of the best payroll processing tools available in 2021. We recommend that you take advantage of any free trials, as this can be an easy way to determine if the chosen solution is the right one for your business.

• OnPay
• Payroll4free
• Gusto
• Workful
• Rippling

1. OnPay

OnPay is a user-friendly payroll option. There’s no need to fuss with manual calculations or look up the benefits and regulations for your specific location. This program will automatically take care of all that for you.

With OnPay, you’ll also have access to robust support to help you get started and process your payments efficiently. In addition to ease of use and excellent support, OnPay has other stellar features, including:

⚙️ Features:

• Mobile-friendly layouts to help you take care of your accounting on the go
• A consolidated dashboard to provide a clear overview of your business
• Integration with top business software, such as QuickBooks and Xero

Furthermore, OnPay is geared towards small businesses. They provide handy tools such as date reminders and state-specific payroll calculators to make life easier for busy business owners. Therefore, you might want to look into this program if your small business could use some tailored support.

💵 Pricing: Finally, let’s take a look at the pricing options. Costs work on a sliding scale with OnPay. You’ll always pay a base fee of $36 per month. In addition, you’ll pay an extra $4 per month for each employee.

For example, a business of ten people can expect to pay $76 per month. For a business of 1,000 people, you would pay $4,036 per month. If you’re interested in OnPay, we suggest that you try out their one-month free offer.

2. Payroll4Free

⚙️ Features:

• Vacation time tracking to help you keep accurate records of paid time off
• Payment methods for both full-time employees and contractors, such as WordPress developers
• An employee portal to give your workers a simple way to help you process their payroll

As you might expect, this free service comes with a few limitations. For example, you’ll need to run it on a Windows operating system. You might also find the ads a bit intrusive. Nevertheless, this won’t directly affect the functionality of the payroll processing. Thus, you might want to check out this program if you’re on a tight budget and only need the basics.

💵 Pricing: For the most part, Payroll4Free really is for free. However, there are some premium options you might want to consider.

If you’re willing to pay $15 per month, the company will deposit and file your payroll taxes for you. If you are ready to pay another $15 per month, you can also have Payroll4Free directly pay your employees from their bank account.

3. Gusto

As your small business grows, you’ll probably need to upgrade your current tools. This can be a headache, so we always recommend choosing services that offer easy scalability. If you have plans for a larger payroll, Gusto is definitely worth considering.

However, scalability isn’t Gusto’s only strong suit. This tool has multiple features that make it an all-around winner for companies of any size.

⚙️ Features:

• Built-in time tracking to make collecting employee data easier
• Certified human resources support staff to help you get used to the system
• Extended hiring and onboarding functionality to streamline your payroll processing

Gusto offers plenty of scalable pricing plans. You even have the option for unlimited payroll runs. Therefore, you might want to choose Gusto if you appreciate the flexibility of their plans.

Additionally, Gusto can also be considered a ‘premium solution.’ The prices can be a bit steep, but they also promise a lot of powerful features that you might need. If your payroll processing is complex, it might be worth the cost.

💵 Pricing: Gusto offers three main pricing plans. The Core plan is suitable for smaller, simpler organizations. You’ll pay a base price of $39 per month, plus a $6 per month fee for each person.

If you’d like to use features such as compliance alerts and priority support, you can choose the top-tier Concierge plan. This costs $149 per month, plus an additional $12 per month per person.

4. Workful

Ease of use is also a big factor in Workful’s plan. They advertise a simple three-step payroll system: add the employee, include their personal information, and let their calculations do the rest.

⚙️ Features:

• The ability to create reports based on niches such as tax liability or time-off taken
• Ongoing tax liability tracking to keep you in the loop if anything changes
• Time-clock logging that’s based on the employee’s physical location

Workful could be a smart choice if you don’t have a lot of time on your hands. The program’s intuitive design helps you get the job done without any hassle.

💵 Pricing: This simplicity extends to its pricing plan. The only payment option is to pay $25 per month, plus an additional $5 per employee per month.

This rate will enable you to access all kinds of features. You’ll be able to integrate QuickBooks, track paid time off, and customize your policies. The only time the price will increase is when you add more employees.

5. Rippling

Rippling strives to make your payments easier. It boasts a 90-second hands-off calculation process.

⚙️ Features:

• An automatic tax calculation that also accounts for international workers
• Highly customizable reporting tools so you can tailor your data to your goals
• A convenient mobile app to make it easy for your employees to send their information

If you have international employees, Rippling is probably the best payroll processing service for you. Accounting can be a tricky subject, but this software helps to simplify the complex issues regarding out-of-country data.

Nevertheless, Rippling is also a powerful all-around employee management solution. If you run a large business, this tool can help you stay on top of things. For instance, you can also use it to keep a close eye on your entire human resources department.

💵 Pricing: Lastly, let’s talk about pricing plans. You’ll need to purchase the Employee Management Platform plan. This starts at $35 per month, plus an additional $8 per employee per month. However, you’ll need to reach out to Rippling directly for a tailored price based on your needs.

Conclusion

Payroll processing is an essential part of any business. However, tackling this task can seem like a daunting challenge. Fortunately, you can use any number of sophisticated tools to help ensure that your accounting runs smoothly.

In this article, we covered a variety of different programs for you to consider. While all of them have their strengths, we have our eye on one in particular: Gusto. This tool has enough features to suit a small business, yet it’s also scalable enough to grow alongside your company.

Do you have any questions about using any of these payroll processing tools? Let us know in the comments section below!

Layout and presentation by Chris Fitzgerald and Karol K.