5 best payroll systems for startups and small businesses
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Think back to the last time a client or customer paid you late. Did you feel annoyed, frustrated, or stressed? Maybe you even thought about ending the relationship entirely.
Well, the same can be said about your workforce. With 65% of employees dependent on their paychecks to survive, the smallest payroll mistakes can cause your workers to leave for companies they believe to be more organized.
The good news is that the right payroll software can eliminate these issues and save you time, effort, and resources. But with so many to choose from, how do you know which one is best for your business?
Here, we’ll compare the five best payroll systems for startups and small businesses, so you can decide which is best for your situation.
What are payroll software programs?
Payroll software is a tool many organizations use to manage and run their payroll. More specifically, it:
- Handles the tedious and time-consuming tasks involved in this process
- Keeps your business compliant with federal, state, and local tax laws
The second point is especially important for companies with employees in different states. Each state has its own unique set of employment tax guidelines, and getting any of it wrong can result in hefty penalties and fines for your business.
Some providers even go beyond basic payroll features—these vendors will often offer add-on services like tax filing, human resources (HR) support, health benefits administration, and time tracking for an extra fee.
If you’re interested in the benefits payroll software can bring to your own organization, here are some features every small business payroll system should have.
5 important payroll software features to look for
1. Easy to use
Payroll is already difficult enough for most new business owners, so choose a user-friendly software with a simple interface. Chances are, your team will use the software to update payment information, access pay stubs, and download tax documents, so you’ll also want an intuitive employee portal that’s easy to navigate.
Read reviews, watch YouTube videos, and take advantage of any software trials or demos available. Also look for providers that offer extensive help articles and customer support for you and your team to rely on.
2. Runs payroll automatically
In addition to saving you time on running payroll, the right payroll automation platform ensures you don’t have to hire someone to manage it for you. With the software doing most of the heavy lifting, you’re also much less likely to make a mistake with someone’s paycheck.
Keep an eye out for full-service tools with unlimited runs—and avoid ones that require you to manually initiate payroll yourself.
3. Provides employee benefits
Great benefits help you attract and retain top talent. A payroll software with benefits administration features allows you to invest in your people, without too much additional time or effort.
Go with a vendor that either offers benefits your employees are interested in, or integrates with third-party providers for the same effect. If you’re not ready to offer health insurance and other employee benefits just yet, consider choosing one that allows you to do so in the future.
4. Offers tax support for full-time, part-time, remote, and contract workers
Depending on what kind of workers you have, you may be required to submit payroll reports, W-2s, 1099-NEC forms, and other documents to a number of tax agencies throughout the year. Companies with remote employees or additional income reporting requirements have other guidelines to follow as well.
The best payroll software gathers all of this information and submits it to the proper authorities on a timely basis. Determine what your industry and company requires from a payroll solution, and choose the software that best fits your needs.
5. Integrates with your finance and HR stack
Payroll management software that doesn’t integrate with the other tools in your tech lineup will slow your team down, increase the potential for errors, and ultimately prevent you from getting an accurate look at your company’s health.
For a streamlined back office experience for your business, make sure the tool you choose offers API integrations for your existing finance automation and HR software.
5 best payroll providers for small businesses
With the above features in mind, where should you start your search?
Below, we’ve compiled several options for founders and entrepreneurs to consider. Each one shines in a particular area, but all five platforms simplify payroll for already-busy business owners with their ease of use, flexibility, and abundant features.
Gusto Payroll: Overall best payroll service for startups
This benefits software offers feature-rich yet affordable plans that work well for handling payroll for startups and small businesses. Full-service payroll, unlimited payroll runs, helpful automations, and an easy-to-use interface simplify what’s typically a complicated process for new business owners. Gusto also comes with a suite of HR support tools to handle everything from online offer letters to onboarding.
ADP Run: Best for fast-growing businesses
ADP Run is a great option for scaling organizations with W-2 employees, given its flexible plans and a rich library of accounting, ERP, and time and attendance integrations, among others. HR teams can further customize the platform with business insurance, health benefits, and retirement add-ons to make it a full-fledged HR solution. Once businesses are ready to transition to a more powerful solution, they can easily migrate to ADP's mid-market and enterprise payroll options.
Intuit QuickBooks Payroll: Best for companies using QuickBooks
Because of its seamless integration with QuickBooks Online, QuickBooks Payroll works at its best with companies already using the brand’s accounting software. But that doesn’t mean this online payroll option won’t work for others. The platform offers easy-to-read reports, unlimited runs, same-day direct deposit, time tracking, and an employee self-service portal with all pricing plans.
Square Payroll: Best for companies using Square POS
Just as QuickBooks Payroll works great with companies already in the QuickBooks ecosystem, Square Payroll is ideal for retailers and businesses using the Square POS software. It comes with an impressive suite of features for an affordable price, including full-service payroll, automated payroll tax filings, employee benefits, plus timecard, tips, and commissions integrations.
Patriot Software Payroll: Best for early-stage startups and companies on a budget
Patriot Software Payroll packs a punch for its price. Take advantage of unlimited runs, two-day direct deposit, accounting and HR software integrations, an employee portal, plus free payroll support for all plans. New business owners who aren’t familiar or interested in setting up payroll themselves may find this option particularly helpful—just hand off your information to a Patriot representative, and they’ll handle it for you.
Best practices for setting up small business payroll
Choosing the best payroll software in the world won’t make much of a difference if you use it incorrectly or follow outdated practices. So as you set up payroll for your own company, keep these tips in mind to avoid future problems.
Use direct deposit
Enabling direct deposit allows you to:
- Simplify the payroll process for you and your employees
- Send payments to your workers safely
With this in mind, it’s little wonder that so many businesses have opted for direct deposit themselves. If this is something you plan on doing too, make sure to collect your employees’ banking information during the onboarding process so they don’t have to deal with paper checks in their first few weeks.
Spend the right amount on payroll
Payroll is the largest expense for most small businesses and startups, so it’s important to allocate enough money for it every pay period. Otherwise, you might find yourself out of money for other necessary business expenses.
Stay on top of your finances by estimating what percentage of your funds should go to payroll every month, based on your current expenses. Check in every few months and adjust this number as needed.
Classify your workers correctly
Incorrectly classifying employees as independent contractors (or vice versa) could result in unexpected fees and benefits expenses for your business. To avoid this, review resources from the IRS and the Department of Labor before you set up payroll to ensure your workforce is properly classified.
And because states like California and New York have updated their employment classification guidelines in recent years, consider reviewing yours regularly so you remain compliant with the latest employment laws.
Organize your records
Even with an automated solution, your company’s payroll needs don’t end after setup. You’ll want to make sure all of your payroll and tax forms are kept organized and safe. Consider making multiple copies and storing them in separate places—such as a digital copy in your payroll software and a hard copy in your office—in case they’re lost or damaged.
Keep in mind that certain documents, like payroll records and employment information, must be kept on file for several years in case you need them during an audit.
Automate onboarding and simplify accounting with Ramp
Your employees care most about your onboarding and payroll processes, so you want to keep an especially close eye on them.
- 53% of new hires aren’t clear on how to be productive in their role
- 53% aren’t clear on their employer’s core values
- 47% aren’t clear on their employer’s goals
Automating your onboarding process with a tool like Ramp ensures you keep new hires engaged and stay on task during one of the most pivotal stages of their employment.
Our software integrates with popular HRIS and payroll providers like Gusto and ADP to streamline the onboarding and accounting processes. With Ramp's accounting software for startups, your HR department can roll out enticing employee benefits with just a few clicks. And because Ramp is built to scale, you can easily update employee spend controls as you hire and promote team members.
Take a tour of our software to see how you can make the most of your payroll software with Ramp.
The information you’ll need typically includes, but isn’t limited to:
- Company legal name, DBA, and addresses
- Federal, state, and local tax ID numbers
- State unemployment (SUTA) account number and rate for each state you have employees in
- Workers’ compensation insurance account number and rate for each state you have employees in
- Business bank account details
- Name, address, Social Security number, tax filing status, pay rate, pay frequency, deductions and contributions for each employee
- Payroll registers and other payroll information for the year
- Employer taxes for the year
- Copies of all tax filings for the year
For quicker setup, have all the information you need in one place so you’re not left scrambling for documents in the middle of the process.
- Get an Employer Identification Number (EIN) and bank account for your company, if you haven’t already
- Have your workers fill out the appropriate tax forms (such as Form I-9 and W-4 for employees, and Form W-9 for contractors)
- Based on the information provided by your employees, register your company with any state you’re not already registered in
- Determine your payroll schedule (e.g. weekly, biweekly, monthly)
- Calculate gross pay and deductions for each employee, and subtract deductions from gross pay to get their net pay
- Pay workers according to your payroll schedule
With a dedicated payroll platform, this process becomes much easier. Setup typically starts and ends with adding your company and employee information to your account. With employee portals, your team can even input their tax and banking details themselves.
The software will then use the information to automatically calculate and pay your workers the right amounts at the right frequency.
Ramp doesn’t offer payroll software, but our integrations with top providers help streamline your finance and HR processes. Connect your payroll platform to Ramp to easily:
- Get team members up to speed with your expense management processes
- Set new employees up with business credit cards and other benefits
- Improve the onboarding experience for new hires and their managers