Choosing the Right Payroll System for Your Business

Understanding Your Business Needs

Before diving into the various payroll systems available, it is essential to understand your specific business needs.

• Size of Your Business: Are you a small startup or a large corporation? The size of your business will significantly influence the type of payroll solution you need.

  
  

• Number of Employees: Consider how many employees you have. A system that works for ten employees will not always be suitable for a company with hundreds or thousands.

  
  

• Industry Requirements: Different industries have unique payroll and security requirements. For example, businesses in the construction industry may require specific compliance features, or government departments may have specific security checks that must be met prior to rollout.

  
  

By assessing these factors, you can narrow down your options and find a system that fits your business.

Types of Payroll Systems

There are many types of payroll solutions available (many of which are listed in our Vendor Marketplace), each with its own advantages and disadvantages.

1. Manual Payroll

Manual payroll involves calculating employee wages by hand. While this method is the most cost-effective for start-ups or small businesses, it can be very time-consuming and prone to errors. It is certainly not a sustainable way to run an organisation that is of medium to large size.

• Pros: Low cost, full control over the process.

  
  

• Cons: High risk of mistakes, very time-consuming, not scalable.

  
  

2. Payroll Software

Payroll software automates many aspects of payroll processing. This option is becoming more popular among small businesses these days, particularly since the introduction of STP and the unfortunate increase in complexities and changes experienced in the workforce by many employers. This is highly recommended for all businesses of medium to large size.

• Pros: Saves time, reduces errors, most often includes tax compliance features.

  
  

• Cons: Initial setup can be complex and overwhelming for most business owners, usually requires ongoing subscription fees and costs to the business, still needs human oversight.

  
  

3. Outsourced Payroll Services

Outsourcing payroll means hiring a third-party company to handle payroll for you. This option is ideal for businesses that want to focus on their core operations. It is a great option for start-ups, but also suitable for medium to large organisations when a suitable provider is found.

• Pros: Saves time, reduces compliance risks, usually includes access to multiple payroll experts (not just one payroll officer within your organisation who may fall sick).

  
  

• Cons: Less control over the processes and operations by which the service is delivered to your employees, potential communication issues when the function is removed from within your own organisation.

  
  

4. Cloud-Based Payroll Systems

Cloud-based payroll systems allow you to access payroll information from anywhere with an internet connection. These are very common today. This flexibility is hugely beneficial for remote and hybrid working teams.

• Pros: Accessible from anywhere, often includes automatic updates.

  
  

• Cons: Dependence on internet connectivity, potential cybersecurity concerns.

  
  

Key Features to Look For

When evaluating payroll solutions, consider the following key features:

1. User-Friendly Interface

A user-friendly interface is absolutely essential for ease of use. The system's interface, task checks built-in, and automated reporting can make all the difference in making your payroll look 'scary' or not. There are many times as a business owner you 'just need to get the job done' (e.g., your payroll officer unexpectedly resigns), so a system's interface can make all the difference to success or not, especially in situations such as this. Look for systems that offer intuitive navigation and clear instructions.

2. Tax Compliance

All Australian businesses need to ensure their payroll system can handle tax calculations and accurate filings. This feature is crucial for avoiding severe penalties and ensuring business compliance with local, state, and federal laws.

3. Direct Deposit

Direct deposit is a very convenient feature that allows employees to receive their pay directly into their bank accounts. Having this feature saves a lot of time, especially for medium to large organisations, and reduces the risk of non-payment to an employee.

4. Reporting Capabilities

Robust reporting capabilities can help you validate, audit, and track your business's payroll costs (e.g., leave liability) and analyse any other associated labour costs which could be reduced in your business (e.g., overtime worked in your business, weekend work, etc.). Look for systems that offer customisable reports. This feature alone can assist your business in making more informed decisions around minor changes to rosters and time and attendance, ultimately reducing your organisation's greatest overhead cost.

5. Integration with Other Systems

If you use other systems to manage your organisation's finances or HR records, right through to your company's project management tools and customer relationship management (CRM) system for calculating commissions, it is very important to consider whether the payroll system can integrate with this software too. This integration can streamline processes, improve efficiency, and reduce your post-implementation costs that are not necessarily always visible upfront.

Cost Considerations

Cost is always a significant factor for any business when choosing a payroll system. Here are some aspects to consider:

• Initial Setup Costs: Some systems have high initial setup fees. These can often stem from the consulting support and time that is also provided and required throughout your implementation to determine your unique business requirements.

  
  

• Monthly Subscription Fees: Many payroll software options charge monthly fees based on the number of employees, so for large corporations, this can be an incredibly expensive ongoing business overhead.

  
  

• Hidden Fees: Check the fine print. It is important to also be aware of the additional fees for features like direct deposit, tax filing, or any functionality limitations on what might only be an introduction to a feature offered by the vendor.

  
  

• Long-Term Value: Consider the long-term value of the system. A more expensive system may (and often does) save you money in the long run by reducing errors and saving time.

  
  

Evaluating Vendors

Once you have a clear understanding of your needs and the features you 'need' and 'want' (yes, it is important to differentiate the two), it is time to evaluate potential vendors.

1. Research and Reviews

Start by researching different payroll vendors. Look for reviews and testimonials from other businesses or check out our online Vendor Marketplace—it's a great place to begin when searching for a new payroll system or payroll solution.

2. Demos and Trials

Many vendors offer demos or free trials. It is really important to take advantage of these opportunities to test the system and see if it meets your needs. It is only through this engagement with the vendor that you will truly know what you feel comfortable with regarding system use, service, and support.

3. Customer Support

On the topic of support, consider the level of customer support offered by the vendor (pre, during, and post-implementation). Responsive support is absolutely critical and invaluable when it comes to payroll, especially during the initial setup phase and at go-live.

4. Security Features

Ensure the vendor has strong security measures in place to protect your sensitive payroll data. Look for features like encryption and secure access controls.

Making the Final Decision

After considering all of the above and evaluating your options, it is time to make a decision. Here are some tips to help you finalise your choice:

• Involve Key Stakeholders: Include experienced team members (especially those in your payroll team if you have one) and anyone who will be using the system in the decision-making process. Their input will provide valuable insights that could save you so much time and money.

  
  

• Trust Your Instincts: If a system feels right and meets your business needs (and hopefully wants too), trust your instincts.

  
  

• Plan for Implementation: Once you choose a system, design an agile plan for implementation. This plan should include training for your team leading up to go-live and a timeline for transitioning to the new system. Flexibility to pivot, change, and be creative with system workarounds is always required in the Australian Payroll industry (API) and Payroll Projects as a general rule, so agility is a prerequisite for the project's phases and a successful go-live.

  
  

The Path Forward

Choosing the right payroll system is a significant decision that will impact your business's efficiency, overhead costs, and employee satisfaction. By understanding your needs (and desires), evaluating different options, and considering key features available in the current market, you can make an informed choice for your business.

Remember, the right payroll system is not just about processing payments. It is about creating a seamless experience for your employees' lives outside of work and ensuring compliance with laws and regulations.

As you embark on this journey, keep in mind that the right system can free up your time, money, and resources, allowing you to focus on what truly matters—growing your business.

By taking the time to choose wisely, you can set your business up for success and create a positive work environment for your employees. Happy payroll processing!