Processing payroll can be time-consuming and overwhelming, especially for small business owners. If you’re ready to ditch the spreadsheets and streamline your processes, payroll automation might be the answer. 💡
More than a third of small businesses still manage their payroll process manually. This can lead to costly errors, compliance issues, and wasted hours that could be better spent on growing the business. 😬 The good news is that automating payroll might be easier than you think—and in this guide, we’ll share everything you need to know to get started.
In this article, we’ll cover:
What is payroll automation?
Payroll automation is the process of using technology to automatically calculate and manage employee wages, tax withholdings, and deductions. Some automated systems also streamline tasks like employee onboarding, time-tracking, direct deposit payments, and running payroll reports.
By using specialized software or outsourcing to a payroll service provider, small businesses can eliminate the need for manual data entry and calculations. As a result, you’ll be able to reduce human error and keep more accurate payroll records. 🙌
5 benefits of payroll automation
As a small business owner, dealing with payroll manually can be overwhelming. You have to make sure your employees are paid accurately and on time, while also managing compliance with ever-changing tax laws.
Payroll automation can significantly cut down time and resources spent on these tasks, freeing you up to focus on growing your business. 🚀 But the benefits don’t stop there—here are a few more reasons to automate your payroll processes.
⏰ Saves time and increases efficiency
By automating your payroll workflows, you can save a lot of time on manual tasks. Ultimately, this increased efficiency will allow you to easily hire and manage new team members as your business grows—without having to worry about adding more hours to your payroll process.
📊 Streamlines bookkeeping
Payroll automation can reduce the amount of time you spend on bookkeeping. For example, you can integrate your payroll system with your accounting software so that all transactions are automatically recorded and reconciled.
Integrating your payroll software with your banking platform can also simplify bookkeeping. For example, the payroll software Gusto integrates with the online banking platform Relay (that’s us! 👋).
With Relay, small business owners can open 20 no-fee, individual checking accounts. Then, you can connect Gusto to your Relay account to access helpful money management features.
Relay will help you stay on top of payroll costs by showing you detailed transaction data for every payroll cycle and debit type (like net salary, tax deduction, and reimbursement payments). No more hours wasted deciphering bank statements—with the right payroll provider and banking platform, you can majorly streamline bookkeeping and cash flow management. 🥳
💻 Reduces compliance risks
Manual payroll processing can lead to costly errors, such as incorrect tax withholdings or miscalculated employee benefits. These mistakes can result in fines or legal action that could harm your business's bottom line. 😬
By automating your payroll, you’ll have more accurate records that can help you avoid compliance issues and penalties from the IRS. This will also make your life easier during tax season. ⬇️
🗃 Simplifies tax filing
Nobody likes doing taxes, especially as a small business owner managing multiple employees. With payroll automation, you can have all your data in one place and easily generate reports for your business tax return.
Some solutions even offer e-filing options, which can save you time and effort during tax season. Ultimately, payroll automation will give you the accurate records and calculations you need to know that you're filing your taxes correctly. 🙏
🔐 Enhances data security
Many automated payroll systems come with advanced security features to protect sensitive information from data breaches or unauthorized access. They’ll also ensure that employee data is accurate and up-to-date.
With a central database for all employee information, you won’t have to worry about making mistakes when updating records or calculating wages. Plus, you’ll be able to easily (and securely) access important information like pay stubs, tax forms, and employee records anytime you need them.
9 payroll automation software solutions for small businesses
Now that you know the benefits of payroll automation, it’s time to choose a solution that works for your business’s needs. Most of these platforms offer a free trial so be sure to try out a few different options before making your final choice.
Ready to take a closer look? Here are the 9 best payroll automation software solutions for small businesses and their payroll teams. ⬇️
1️⃣ Gusto
Gusto is a payroll automation software built with small businesses in mind. It’s fairly straightforward and easy to use for business owners who are new to payroll management and automation. Gusto even has a nifty automated tax filing feature and human resources tools to help you onboard employees. 🛠
As we mentioned above, Gusto also integrates with Relay’s online business banking and money management platform. This can save you time on bookkeeping and simplify cash flow management. 🙌
2️⃣ QuickBooks Payroll
QuickBooks Payroll seamlessly connects with QuickBooks accounting software, making it an attractive option for business owners already using this platform. Offering a user-friendly payroll automation software experience and robust tax support, QuickBooks Payroll is a great option for small and medium-sized businesses.
However, it might not be the best option for those seeking advanced HR add-ons. QuickBooks Payroll could also be on the pricey side for businesses managing a large number of employees. 💰
3️⃣ Zenefits
Zenefits is a payroll and HR software loved by many business owners. They take a holistic approach by integrating HR and payroll into a single solution. That means Zenefits handles tax calculations, direct deposit, and compliance tasks, effectively reducing the time and effort you'd spend on a wide range of administrative work. ⏰
However, Zenefits might not be right for every small business. Their HR Base plan requires at least 5 employees, so if your team is still small, you might want to choose one of the payroll automation solutions we’ve already discussed.
4️⃣ ADP
ADP, also known as Automatic Data Processing, is a big name in the world of payroll automation software and HR management.
ADP is a one-stop shop for essential HR and payroll services, helping businesses handle paychecks, stay compliant with tax rules, and manage employee benefits. ADP is also well-known for its timekeeping features, which allow you to track your team's hours and attendance. 📋
ADP is designed for small businesses and enterprise companies alike. However, the platform and pricing plans might be too complex for some business owners who prefer a simpler payroll solution.
5️⃣ Paychex
Paychex is a popular payroll automation software solution that tailors its offerings to businesses of all sizes. 🤓 Their products include a wide range of payroll solutions, comprehensive HR services, and benefits administration support.
Noted for its flexibility and robust compliance assistance, Paychex is a solid choice for small businesses. They’ll be an especially good fit for growing businesses that want a solution that can scale with them.
6️⃣ Wave
If you're a small business and want to keep things simple and wallet-friendly, Wave is a solid choice. It's easy to use and handles the basics, like tax payments and filings, direct deposits, and self-service pay stubs for employees. 💸
If you have only a couple of full-time employees or a team of contractors, Wave might be the perfect fit. Note that Wave won’t automatically file payroll taxes for businesses in every state, so be sure to double-check what they offer before signing up.
7️⃣ Square
Small businesses using Square for payments will find Square Payroll to be one of the easiest-to-implement online payroll services. Just like Square's payment solutions, Square Payroll keeps things straightforward and user-friendly. 😎
That said, Square Payroll certainly doesn't skimp on features. Square can handle tax calculations and benefits—and even offers employee self-service features. This comprehensive payroll automation solution will ensure that you have the tools you need to pay your team efficiently.
8️⃣ OnPay
OnPay is an award-winning payroll automation software known for its affordability, making it an attractive choice for new and growing small businesses. 📈
Despite its budget-friendly pricing, OnPay doesn't compromise on essential features. It includes tax filings, direct deposits, and other basic payroll tasks. OnPay also integrates with accounting software like QuickBooks Online and Xero, which can simplify your business’s bookkeeping.
9️⃣ Patriot
Patriot is a payroll automation software for small businesses. Their basic plan is an affordable and straightforward option for the budget-conscious. With Patriot, small businesses can complete unlimited payroll runs and automate tax calculations and direct deposits. They can also use the platform to pay contractors and freelancers.
It’s important to note that no matter which plan you choose, Patriot doesn’t offer much support for benefits administration. They also charge additional fees for tax filing and time-tracking. 💰
Best practices to get started with an automated payroll system
Before you get started with payroll automation, it’s important to understand your business's unique needs and what you hope to achieve with the new software. This will help you choose the best payroll solution for your company.
Here are a few more tips to help your small business get started with payroll automation:
🔑 Get buy-in: Make sure your team is on board with the change. Explain how the software will make their lives easier and more efficient. Their support is key to a smooth transition.
✈️ Data migration: Clean up your payroll data and ensure it's accurate before transferring it to your new software. It'll save you headaches down the road.
🏋 Training and support: Invest in training for your team. The better they know how to use the software, the smoother things will run.
🌒 Phased implementation: Consider rolling out the new software gradually, starting with your most time-consuming tasks. A phased approach can reduce the learning curve and make it easier to transition.
📞 Communication: Keep everyone in the loop. Inform your employees about the changes, especially if they have new roles in the process. Clear communication can ease any concerns.
👨💻 Gather feedback: After the software is up and running, gather feedback from your team. What's working well, and what needs improvement? Use this input to fine-tune your payroll processes.
Remember, implementing payroll automation software is a marathon, not a sprint. Take it step by step, and soon you'll be reaping the benefits of a more efficient and error-free payroll system.
The bottom line on payroll automation
Finding the right payroll automation software can make a big impact on your small business. When you streamline your processes, you’ll improve cash flow management, tax compliance, and business operations—not to mention, save lots of time and money.
Stay on top of payroll with Relay and Gusto 💸
When you connect the payroll software Gusto to your Relay account, Relay will help you stay on top of payroll costs by showing you detailed transaction data for every payroll cycle and debit type (like net salary, tax deduction, and reimbursement payments). Plus, we’ll send you a notification if your account is low on funds, two weeks before a scheduled payroll cycle. 🙌
Ready to get started with Relay? You can sign up here. 😎
