Businesses often struggle when deciding between cloud-based payroll software and on-premises payroll software. Cloud-based payroll is typically favored by businesses that don’t have the resources to manage on-site servers. On-premises payroll, on the other hand, is often preferred by enterprise-sized organizations that can afford to set up and maintain large on-site servers.
In this guide, we dig deeper into what cloud-based payroll software platforms are, their main functionalities, benefits, market trends, and, most importantly, how to choose one for your business.
Cloud-based payroll software is a vendor-hosted platform that helps businesses to manage payroll securely and efficiently from anywhere, while minimizing errors and compliance violations. It comes with a number of tools that help businesses automate gross-to-net pay calculations, tax withholdings, e-filing, year-end forms like W-2s, and more.
Core Functionalities Of Cloud Based Payroll Software
The core functionalities of cloud-based payroll software go far beyond salary processing. Below are the key features that make them essential for modern businesses:
Accessibility
One of the biggest advantages or functionalities of a cloud-based payroll is that it can be accessed from anywhere. That is what separates it from on-site solutions. Cloud-based software lets managers and administrators access payroll information on the go, making it easy for them to approve payroll runs.
Platform Security
Could-based software ensure data security mainly through three ways. First, they use encryption that ensures all data available on the platform is accessible only by authorized users. Second, it uses multi-factor authentication that sends verification codes to users if they are requesting access to data. Lastly, every vendor strengthens their platform’s security with regular updates. These precautionary measures ensure employee and company data stay secure on the internet.
Automated Payroll
These platforms collect employee data, such as salaries, overtime, worked hours, and taxes. Then, this data is used for payroll calculations, which is done automatically and saves time. After the calculations, the system processes the payroll and generates digital pay stubs that employees receive.
Employee Self Service
Most payroll software offer self-service portals that enable employees to view their pay stubs, request time off, update personal information, review tax information, and more. Having access to all this data means employees don’t have to contact HR every time they need information, which saves a lot of time and back-and-forth.
Below are some of the key benefits of using cloud-based payroll software. These advantages highlight how the system improves accuracy, saves time, and delivers more flexibility compared to traditional payroll methods:
Centralized Data
Modern payroll software collects and saves employee data in a single, easily accessible place. This helps HR teams to easily find any piece of information related to a particular employee at any given time.
Scalability
These software often come with flexible pricing plans that let businesses upgrade and downgrade as per their needs. This helps grow companies but is even more valuable for businesses that experience seasonal fluctuation in their workloads.
Cost Effectiveness
Cloud-based solutions are far more cost-effective than on-premise ones, as businesses don’t have to spend massive amounts on buying expensive hardware and then hiring specialists to maintain it.
Time Saving
Digital payroll software are fast and built to automate and speed up tasks. They free up a lot of time for HR teams and managers so that they can focus elsewhere.
Now that you know about the core functionalities and benefits of could-based payroll software, we’ll share the steps to choose the right one for you:
Step 1: Identify Real Pain Points Of Your Team
The first step will determine whether you take the right path for selecting cloud-based payroll software for your organization. Ensure you have detailed meetings with your staff, discuss alternatives they could use, and only proceed with evaluating a solution when you believe it is necessary.
Step 2: See If It Supports Multiple Job Types
Once you have consulted with your staff, the next thing is to classify all the job roles within your company, like remote positions, on-site positions, and contractual jobs. If you have employees working in different job types, then you should evaluate software that supports all these roles, which will make it easy for you to manage every employee using a single platform.
Step 3: Assess Payroll Capabilities
The most important thing while assessing payroll software is to check what payroll capabilities these solutions offer. One of the most difficult things to handle for HR teams is to calculate, withhold, and submit taxes so that you can start from there.
After that, you can assess its capabilities for payroll garnishments, check if the provider is registered with the Internal Revenue Service (IRS), and whether or not it offers ‘guaranteed’ tax services or not.
Step 4: Check For Pricing Plans That Can Support A Scaling Business
As you grow, so will your payroll requirements. You will need more advanced features that can handle way more complex payroll and legal requirements. Choose software that offers plans for all stages of a business, for example, for small businesses, mid-to-large-sized businesses, and enterprises. This will give you the flexibility to upgrade as you need more features or downgrade if, for some reason, you want to cut costs.
26% of companies that have implemented payroll software or are planning to implement one say their goal is to have a more reliable cloud-based technology in their business. This shows businesses are preferring cloud-based payroll software due to the many advantages it brings to the table.
Another thing worth noting is that when asked, only half of the organizations said they are using cloud-based payroll software, which shows a significant gap in adoption despite all the advantages. It also shows that, as a business owner, you can have a significant edge over half of your competitors if you choose to go with a cloud-based payroll solution.
To conclude, cloud-based payroll software can help alleviate your HR staff from numerous tedious and repetitive tasks. When considering a solution, make sure to involve all the stakeholders and people who will be using it to ensure it meets everyone’s needs.
Lastly, we recommend that you read more resources, discover a lot of options, and take demos and trials of the shortlisted options to better evaluate each platform.