5 best payroll systems for startups and small businesses

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.

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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.

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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?

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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 is payroll software?

Payroll software is a type of application that manages and automates the process of paying employees. It handles the time-consuming tasks involved in the payroll process while keeping your business compliant with federal, state, and local tax laws.

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The tax compliance step 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.

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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.

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If you’re interested in the benefits payroll software can bring to your organization, here are some features every small business payroll system should include.

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.

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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.

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Keep an eye out for full-service tools with unlimited runs—and avoid ones that require you to manually initiate payroll yourself.

3. Manages employee benefits

Great benefits help you attract and retain top talent. Some payroll software includes benefits administration tools that allow you to manage employee benefits packages.

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Benefits administration features typically include a dashboard to view employee benefit data, a benefits portal where employers and employees can enrol in benefits or update information, and built-in compliance and reporting tools.

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If you’re not ready to offer health insurance and other employee benefits just yet, consider choosing a payroll solution 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.

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The best payroll software gathers all of this information and submits it to the proper authorities for you, so you don’t have to worry about missing the deadlines.

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 finances.

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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?

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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 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.

Can I do my own company payroll?

Yes, you can do your own company payroll, but it requires a good understanding of tax laws and payroll regulations. As your business grows, you may find it more practical to hire a professional or use a payroll service to ensure compliance and save time.

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

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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.

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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.

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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.

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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.

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For instance, a 2021 survey found that 25% of employees felt that their company didn’t provide them with a structured onboarding experience. Perhaps as a result, a different survey showed that:

• 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

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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.

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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.