Free Payroll Software

You're probably reading this because you are a small business owner who has recently grown and part of that growth is adding a few software solutions to save you some time and money.  If I'm right, this is the perfect post for you.  We will be reviewing the best free payroll software solutions in 2019 and 2020.

We will tackle  a few different methods on finding the best payroll software for your small business.  The payroll software for your friend may look a lot different than the best payroll software for you.  Let's examine the pros and cons around features, integrations, flexibility and lastly...is it really free.

Payroll software is the tool to calculate an employee's wages, taxes, employer liabilities and ensures the state and federal compliance is in check. Many of the payroll software benefits include support with your financial management software, banking and direct deposit.  Payroll should be done using a reliable software to automate your calculations and stay current with regulation.  As tax rates change, you as the employer are held responsible.  Having a payroll software in place can actually save a tremendous amount of time and clear-up any potential miscommunication.  Nothing is more sensitive to your employees than ensuring their paycheck is correct.

How to decide which payroll software is best?

Benefits of a payroll system

There are 4 major benefits to look at when deciding which payroll software is best for your small business.

1. Minimize Errors. There are many complicated numbers to identify the proper taxes and liabilities when paying an employee.  You can minimize the risk of those errors by using a payroll service.  As mentioned earlier in this article, having an employee under or over paid can create a lot of frustration.  You can avoid those terrible encounters by trusting a proven payroll software.
2. Save Money. When using a software to run your payroll, you are automating a lot of work.  You can keep yourself from outsourcing the payroll responsibilities to a book keeper or accountant.  Their time will cost more than a software to process payroll for you.
3. Save Time. Time is precious to small business owners.  Not only the payroll cycle but the reporting and filing taxes can be quite burdensome.  Many of the payroll services will have a dashboard for each employee to access former pay stubs and end of year tax documents.  This often times is one of those time saving you forget until January when everyone is bugging you for important documents to file taxes.
4. Flexibility.  Small business owners love the flexibility of running a business.  With that, you might feel strapped to be at your office every pay day.  With a payroll software you can automate and process payroll from anywhere.  Many of todays companies highly encourage all their employees to be on direct deposit for this very purpose.  Give yourself the freedom to process payroll from anywhere at anytime.

Features to look for in your payroll software

When analyzing the best payroll software for your business, you'll want to chart out the features you think are most important to you.  Many of us starting out are not sure what features we want vs we need. Here is a list of what features your payroll service should have available:

• Integrated w/ bookkeeping software
• tax tables subscription (Federal & State)
• print checks and stubs
• Print Federal tax forms
• Print State tax forms
• e-file Federal forms
• e-file State forms
• e-pay Federal taxes
• e-pay State taxes (for states that have the option)
  direct deposit option
• Paychecks & direct deposit
• 401(k) plan administration
• Pay garnishment
• Pay adjustments
• Paid time off tracking and reporting
• Automated tax updates

Insights and payroll reporting

Having the right data at your fingertips can help you run your business from a strategic mindset and not under emotional triggers.  A good payroll provider will allow you to build reports to support key milestones and decision making.  Look for dashboard or reports you can easily customize to your small business needs.

Data security

Your payroll information is going to be layered with personal and sensitive information.  At the very least it will include, names, birthdates, social security numbers, salaries and enough information about tax information to commit a high number of fraud issues.  It will be important to verify the companies liability to this data.  What kind of protection you have if the data is compromised.  Find out how the company is storing the data and if it's using their own data storage or outsourcing to a 3rd party data center.

Growth and scalability

If you're in an employee intensive business model with plans to grow or hire a high volume of employees, you'll want a provider who can handle you.  Talk with them about the on-boarding process of new employees.  How quick is it to add new employees, get them started with payroll.

What Is the Best Payroll Software for Small Business?

Gusto

Often referred to as the best payroll provider for SMBs because of the full feature sets at a reasonable price.  Many of the features we discuss in this article are all covered inside of Gusto.  It is not the cheapest, but for price, confidence and features, it's a strong buy as the best option.  The base price for Gusto is $39 per month plus $6 per month per employee or contractor. Gusto doesn’t offer an edition with more limited features. It offers only one payroll package that’s inclusive of all the features a small business needs, including tax support, 1099s, and payments.

Intuit QuickBooks Payroll

Many SMBs rely on Quickbooks for their accounting, inventory and operations of their business.  It is a natural fit to wrap your payroll into your financial software as well. Intuit QuickBooks Payroll offers tiers of service grouped by whether you run your payroll yourself or have the software run it for you. Enhanced payroll packages range from $55 per month plus $4 per month per employee or contractor to $95 per month plus $4 per month per employee or contractor.

Patriot Payroll

Not known for all the bells and whistles, but it is the best low-cost payroll software for small businesses.

Payroll4Free

If 100% free is your number one priority, this is the best free payroll software in the market. There is a limitation to 25 total employees.

The Perfect Payroll Process

Set up New Employees

Before running your first payroll, you'll want to ensure all the paperwork and information for the employee is accurate.  If you're including benefits, have all your insurance plan, retirement and deductions explained to the employee.  You should have federal and state tax withholdings documents as well.

Collect and Verify Timecard Information

For hourly employees, employers must collect and analyze information about hours worked.  Ensure you have a process mapped out and trained each employee on the importance of this process.

Processing Payroll

The first step in processing payroll is to prepare a paycheck for each employee.

There are four major elements to understand when processing your payroll:

1. Gross Wages

The total amount your company pays each employee before any deductions, based on whether the employee is salaried or hourly. Deductions from employee pay can include insurance premiums, retirement plan contributions, benefits, and tax withholdings.

Many times we get confused between Gross Wages vs Net Pay. The amount of money your employees actually receive in their paychecks is called net pay.

2. Benefits

While businesses generally cover the cost of benefits, a portion of the total amount may come from your employees’ gross wages. This is viewed as an extra expense line on the employer if there are employer portion of benefits to be added.

3. Social Security and Medicare

Every w2 employee will have a Social Security and Medicare expense. You need to deduct Social Security and Medicare payments from your employees’ gross wages.

4. Tax Withholdings

Your company must withhold each employee’s share of federal and state income taxes from payroll. You need to calculate income taxes and forward payments to the appropriate government agency on a semi-weekly or monthly basis.  One thing to consider here is if you are paying bi-weekly or semi- weekly, you'll be processing 26 payroll cycles in a year.  If you are paying on a monthly basis (Ex. 1st and 15th of the month) you'll only have 24 payroll runs.

Issuing Paychecks

It is common to use ACH or direct deposit.  Manual checks can still add more risk than reward.

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