How Does Payroll Work?

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Payroll is an important task for any business. As an employer, it's your job to make sure your employees are paid correctly and on time. From recording hours worked to calculating employee wages, your tasks can be overwhelming. That's where payroll systems come in. 

With the help of payroll software, you can automate the entire payroll process so you don't have to perform every step manually. Understanding the methodology of payroll systems, the costs associated with payroll, how to set up a system, and how to find the best software solution can make the difference between an intuitive, efficient system and one that creates headaches every time you run payroll.

Why is a payroll system necessary?

Whether it's a Cloud Payroll or a manual process, you need a system to track employee hours, understand deductions and make payments to your employees. 

Implementing a manual process can be a huge drain on time and resources for a growing small business. If you have multiple employees, you'll need to manually record their hours and rates. Then you'll need to keep up with federal and state tax laws so you deduct the correct amount of tax from each paycheck. 

Finally, you'll need to pay employees, track expenses for the current year, and keep track of vacation payouts. If you're trying to handle payroll and run your business at the same time, you'll quickly become overwhelmed. 

Payroll technology automates all the necessary requirements for accurate payroll. It automatically calculates the correct amount that should be paid to your employees each pay period based on hours worked. If you have salaried employees, the payroll software will track them and pay them accurately. It can even account for and calculate overtime.

One of the biggest benefits of free payroll software is that taxes are automatically deducted from employee paychecks. You no longer have to worry about paying payroll taxes each spring or misreporting your employees' wages. 

Need to integrate your payroll software with time tracking or HR software? Some solutions offer open APIs or more pre-built integrations than others. Look for a flexible solution if you need to integrate your payroll software with other platforms you rely on, such as your current accounting software.

Does the payroll solution offer employees self-service access? Employees should be able to log in and view pay stubs, year-end tax forms, and some payroll preparation functions.

Does your payroll provider need to manage your employees' time off? Some payroll systems have time off features that comply with your employee time off policies. For example, you can allow your employees to request time off directly in the system.

Does your payroll provider need to report new employees to government agencies on your behalf? Many payroll software platforms offer reporting tools that allow you to keep state and federal agencies informed of changes and growth in your workforce.