Best payroll software for small business: chosen on the filings you owe

How to choose payroll software on the obligations, not the interface

1. List every filing you owe, by deadline. Federal, state and local, plus year end forms. Then ask each vendor which of those they file, which they prepare for you to file, and which they ignore. The three answers are very different products.
2. Ask who pays a penalty caused by the software. Some vendors guarantee their filings and pay the penalty if they get it wrong. Others prepare and disclaim. This single clause is worth more than any feature and is rarely on the comparison page.
3. Run one parallel period. Process a real pay period in the new product alongside the old arrangement and compare every figure. Differences are normal, unexplained differences are the reason to run the parallel.

Top US payroll platforms with easy migration support: what to test

Moving payroll is where small employers get hurt, so judge the move before the product. A platform with real migration support loads each employee's year to date wages, withholding and deductions, takes over your federal and state tax account numbers, and confirms which quarterly and annual returns it will file for the period before it took over. Without the year to date figures the annual wage statements come out wrong, and the error surfaces months later.

Ask each vendor three things in writing: who enters the history, the vendor or you; which filings for the current year it will make on your behalf; and what it checks before the first live pay run. Then run the parallel period in the steps above. A vendor that answers all three precisely is offering migration support; one that sends a spreadsheet template is offering an import screen.

What separates the products at this size

Not the pay run itself, which everybody handles. What differs is the surrounding work: new starters, leavers mid period, a correction after filing, multiple states, and the year end. A product that is pleasant for an ordinary month can be very poor at all five.

Test with your own awkward cases rather than a clean sample. One employee who started mid month, one who left, one on two rates, and a bonus. If the product handles those without a support call, the ordinary months will look after themselves.

Is there any free payroll software, and what does free mean here?

Genuinely free full service payroll is rare, because the filing and the liability cost the vendor money every month. What exists is free calculation with the filings left to you, free tiers capped at very few employees, or free as part of a bundle that is paid for elsewhere.

For an employer with two or three people and the appetite to file themselves, a calculation only product can work. For anybody else the saving is small against the risk, because the penalties for getting the filings wrong exceed a year of subscription quickly.

Electronic payroll systems: the questions that shorten the shortlist

Which states do you file in, do you pay contractors as well as employees, do you need time and attendance in the same product, and does an accountant need access. Four answers usually remove most candidates before any demonstration happens.

The fifth is the one small employers forget: what happens when you leave. Payroll history has to be retained for years, so confirm you can export a complete record rather than a current year summary.

Common questions

Should payroll and accounting be the same product?

They need to agree rather than be identical. A clean export into your accounts is usually enough, and it keeps two decisions independent.

Payroll outsourcing software or full service: is it worth the extra?

For most small employers full service is worth it, because the vendor files the returns and often carries the penalty risk for its own errors, where outsourcing software that only calculates leaves both with you. The exception is a very small, very simple payroll with somebody willing to do it.

Is in-house payroll software for small business enough?

It can be for a few employees in one state and someone willing to own the deadlines. In-house software calculates pay and prepares the forms, but you make the tax deposits and file the returns yourself, and the IRS deadlines and penalties apply to you whichever product you used. Once you add states, contractors or turnover, a full service product usually pays for itself.

How much does payroll software cost a small business?

Nearly always a monthly base plus a per employee charge, so the comparison depends on your headcount rather than the advertised entry price.

Can we switch mid year?

Yes, and the clean moment is a quarter boundary. Mid quarter switches mean two sets of figures to reconcile at year end and are worth avoiding where you can.

Coverage by country

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