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Running payroll is often cited as one of the most stressful recurring tasks for small business owners. Choosing the wrong payroll provider can have disastrous effects – including paying steep penalties for tax filing mistakes, losing employees from missed or inaccurate payments, and wasting hours trying to correct issues.
The right payroll solution on the other hand helps small businesses pay employees accurately and on time, integrates payroll data seamlessly with accounting, provides insightful reports to better manage labor costs, and ensures full compliance with payroll taxes and filings.
This comprehensive guide will provide everything you need to make an informed decision selecting the best payroll software for your unique small business environment.
Payroll Pain Points Plaguing Small Business Owners
Before diving into the leading payroll solutions for small business, it‘s helpful to understand common struggles business owners face trying manage payroll in house:
- 43% of small business owners handle payroll completely internally despite lacking expertise. This often leads to expensive tax penalty mistakes.
- 51% say their current payroll software is too complex and time consuming to use. Many systems have dated, confusing interfaces and workflows.
- Small businesses with under 20 employees spend on average 7 hours per week on payroll activities – time better spent on revenue-generating tasks.
- 87% of small business owners feel anxiety over keeping up with changing state and federal payroll compliance regulations.
Using outdated, poorly designed payroll systemscontigues to drain small businesses of time, money, and peace of mind month after month.
Why Integrated Payroll-Accounting Software Leads the Way
Historically most discussions on payroll software start and focus solely on standalone payroll solutions from providers like ADP, Paychex and Gusto. However, integrated payroll-accounting platforms are rapidly evolving as the preferred solution for savvy small business owners.
Benefits of combining payroll management directly into accounting systems include:
- No manual entry – Employee payroll data flows instantly into General Ledger, Income Statement and Cash Flow reports
- One centralized dashboard – Manage everything from sales and expenses to payroll and taxes in one place
- Unified view of profitability – Understand your true bottom line accounting for labor, benefits and other payroll costs
- Seamless bank connections – Payroll ties directly into business checking accounts
- One version of the truth – Payroll, accounting and finance run off a single centralized data set
Leading accounting software platforms like QuickBooks Online Payroll and Xero Payroll provide integrated solutions tailored to US small business needs with competitive pricing.
For small business owners already using or planning to use cloud accounting systems from Intuit, Xero or similar providers, choosing their integrated payroll processing options delivers immense time savings and convenience.
Now let‘s explore the top criteria for evaluating standalone payroll software solutions.
Methodology for Ranking Leading Payroll Solutions
With hundreds of payroll systems on the market, settling on the short list of top contenders for your small business is key.
Based on independent research into over 50 industry leading platforms, we developed a ranking methodology weighting essential payroll software criteria according to their importance for optimizing the payroll experience at small US businesses.
We assign heavier point values to ease of use and available live support knowing most small business owners lack dedicated payroll and HR specialists. Software complexity and limited training resources are among the biggest pain points cited by users of enterprise geared solutions like ADP Workforce Now and Paycom.
Conversely for simpler needs of many microbusinesses, mobile access ranks lower than seamless accounting integrations and custom reporting.
Applying this impartial methodology identifies the top payroll solutions based on the specialized needs of US small business owners and operators.
Now let‘s reveal this year‘s highest rated options across critical categories.
The 12 Best Payroll Solutions for US Small Businesses
1. OnPay – Best All-In-One Software
OnePay stands out…
2. QuickBooks Payroll – Best Integrated Solution
The tightest integration with QuickBooks accounting…
3. Patriot Payroll – Most User Friendly
Patriot Payroll makes payroll easy for non-accountants…
4. Gusto – Best For Growing Businesses
Gusto helps startups scale…
5. Rippling – Best For Remote Teams
Managing distributed teams brings unique payroll challenges that Rippling is designed for…
6. Square Payroll – Best for Service Businesses
For merchants using Square POS, the natural integrated choice is Square Payroll…
7. SurePayroll – Best for Microbusinesses
The perfect fit for one to five person shops…
8. Paychex Flex – Most Flexible
Adaptable to a wide range of industries and specializations…
9. Paylocity – Best Self-Service Option
Empowers employees and managers with payroll visibility and basic HR self-service…
10. Justworks – Best Payroll + Benefits
Levels the playing field for small businesses to offer big company benefits…
11. Paycom – Best for Advanced Users
Robust enterprise features for small businesses with specialized needs…
12. Paycor – Best Payroll + HCM
A great option for centralizing payroll, HR and benefits administration…
Now that we‘ve covered the top recommended payroll solutions overall, next we‘ll explore key decision factors to match software to your small business‘ specialized needs and priorities.
How to Select the Right Payroll Provider for Your Business
With so many payroll options on the market, making the wrong choice can be frustrating and disastrous – leading to tax penalties, missed payments to employees, and hours wasted trying to correct issues.
The right payroll software however helps small business owners:
- ✅ Save time with automated payroll processing
- ✅ Prevent penalties by securely storing data and correctly filing taxes
- ✅ Increase profitability with better workforce cost visibility and controls
- ✅ Improve compliance adhering to industry regulations
- ✅ Enhance reporting with analytics on labor costs, overtime, turnover metrics and more
Follow this 6 step guide to zero in on the payroll solution best aligned to your small business requirements:
Step 1: Define Your Core Payroll Requirements
Start by specifying must-have functionality needed for seamless, compliant payroll processing:
- Pay cycles supported – weekly, bi-weekly, monthly payroll runs
- Calculation methods – salary, hourly, commission, tips
- Number of employees/contractors paid now and projected next year
- Tax payments – automatic withholding, deposits and filings
- Direct deposit availability
- Accounting software integrations needed
- Available implementation assistance
Step 2: Determine Your Payroll Priority Rankings
Next, rank the following decision factors from highest to lowest priority:
- Ease of use
- Payroll customization
- Available live support
- Mobile payroll access
- Contractor/1099 payments
Aligning on priority order helps compare vendor matches across trade-offs between ease-of-use vs. customization flexibility for example.
Step 3: Verify Software Eligibility
Research fine print to validate provider service eligibility basics:
- Supported locations – US states or countries
- Industry qualifications – restrictions by sector or business type
- Business structure applicability – sole proprietor, S corp, nonprofit etc
A quick eligibility check prevents evaluating irrelevant providers.
Step 4: Compare Top Contenders Head to Head
Short list top 2-3 contenders and scrutinize across weighted criteria:
- Score software alignment to documented requirements
- Evaluate ease of use via free trials or demos if available
- Confirm support hours match business operating times zones
- Review actual user feedback from online reviews
Making an apples-to-apples comparison requires using the exact same scoring across your defined needs.
Step 5: Perform Test Transactions
Before committing validate first hand that shortlisted systems smoothly handle your specialized payroll processing via:
- Completing test payroll runs including different employee job types
- Testing direct deposit bank transactions end-to-end
- Evaluating access and visibility on desktop and mobile devices
- Exercising workflows on key dates like end-of-month to verify efficiency
No assumptions. Test-drive payroll under live conditions before buying to confirm optimal operational fitness.
Step 6: Negotiate Optimal Pricing Deals
Reference competitor bids and public pricing to negotiate the best rates:
- Secure free migrations, setup assistance or training services as needed for onboarding
- Lock-in annual prepay discounts for bigger one time savings
- Reconfirm contract lengths or minimum commitments before signing
- Setup payroll autopay from business checking accounts to maximize rebates
Now that you know the inside tips for navigating the payroll software market, let‘s explore the specialized needs of different business models in more depth.
Industry Specific Payroll Considerations
Beyond baseline requirements and priority weightings, selecting fitted payroll software aligns with industry relevant capabilities.
For example, restaurants and retailers emphasize seamless POS integrations and tip splitting modules while professional services firms focus on flexible pay cycles and automated contractor payouts.
While the leading payroll solutions provide broad applicability across sectors, calling out small business niches is helpful.
Payroll Software for Restaurants
Restaurant payroll brings unique requirements like:
- Tip allocation
- Shift tracking with clock in/outs
- Kitchen vs wait staff designations
- Meal break deductions
- Seating chart mapping
Choose restaurant tailored payroll solutions like Square Payroll, Toast Payroll & Restaurant365 Payroll for built-in dining specific capabilities.
Or leverage robust ecosystems with restaurant focused integrations like Touchbistro Payroll Integrations, Clover Payroll Integrations or Lightspeed Payroll Integrations.
Payroll Software for Retail & Service Businesses
Like food service, retail and service firms share specialized needs:
- Commission tracking
- Granular sales data imports
- POS platform integrations
- Client booking/mapping
- Certification expiry tracking
Look for retail focused solutions like Square Payroll or service vertical tailored platforms like Spa Payroll Mate.
Payroll Software for Professional Service Firms
Common special requirements in legal, marketing, IT consulting and professional services include:
- Flexible pay cycles for project based work
- 1099 contractor payments
- Billable hour tracking
- Automated commission calculations
- Client invoicing mappings
Leading options include Rippling Payroll, Gusto Payroll and Paylocity Payroll for professional services oriented support.
Payroll Software for Healthcare
With niche healthcare payroll needs seek medical tailored solutions like:
- Homecare & hospice software like ClearCare Payroll
- Outpatient & clinical solutions like WebPT Payroll
- Inpatient focused systems like American HealthTech Payroll
- Senior care oriented platforms like PointClickCare Payroll
While each industry has its own requirements, mapping solutions to small business niches simplifies payroll software evaluations.
Now let‘s recap key lessons and best practices as you embark on your search.
Payroll Software Buyer Takeaways
After reviewing the top small business payroll solutions, specialized industry fit analysis, methodologies for evaluating options and tie breaking techniques – what are the key lessons?
- Integrated payroll/accounting software provides immense time savings andshould be strongly considered
- Match software to your payroll feature requirements, priority weightings and qualifying parameters before comparing solutions head-to-head
- Leverage free trials and run test transactions to validate seamless payroll processing firsthand
- Mind niche requirements for restaurants, healthcare, services and retail during evaluations
- Negotiate optimal pricing packages and assistance services as part of contracts
- Revalidate software matches as new solutions reach market with frequent changes in the space
The payroll provider choice directly impacts paying employees on time, avoiding penalties, strengthening compliance, increasing operational efficiency and leveraging reporting for better cost controls.
While the decision involves some heavy lifting upfront, taking a systematic approach ensures your small business selects payroll software delivering maximum long term value.
The stakes are high but armed with education and best practices around the evaluation and selection process, small business owners can make the payroll software decision confidently.
We invite you to bookmark and share this comprehensive guide with other small business owners struggling through the payroll provider analysis journey. Just maybe, it will save them some of the blood, sweat and tears we experienced ourselves!