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Benefits of Using Payroll Software

Written by:

Natalie is a writer with experience in operations, HR, and training & development within the software, healthcare, and financial services sectors.

Reviewed by:

Daniel Eisner is a payroll specialist with over a decade of practical experience in senior accounting positions.

Benefits of Using Payroll Software

Benefits of Using Payroll Software

Running payroll usually requires the HR team to access, compile, and maintain tons of business stats and information. Even with just a few employees, the process can get messy and lead to major complications. Fortunately, this is where payroll software comes in handy. 

Rather than running payroll manually, businesses can use software to help HR professionals efficiently and smoothly oversee the entire payroll process, from recordkeeping to calculations and employee payments. 

This guide explains the main benefits of payroll processing software, as well as the drawbacks.  

Accurate Calculations 

payroll in words and laptop

Payroll software helps ensure that businesses accurately and punctually compensate their employees. This is an especially critical task for any business, as many workers live paycheck to paycheck. An incorrect payment can trigger significant problems at home, as well as decreased morale at work. 

Embracing software won’t enable your HR team to do nothing and still complete payroll, but it  will sharply reduce payroll’s demands on their time and energy – not to mention stress. Most payroll process software applications require the input of two key details: 

  • Wage information for each employee 
  • Hours worked within the pay period (for hourly employees)

Automated Payroll System

Payroll software enables businesses to automatically compensate employees on payday. The software accomplishes this by integrating with other business processes and systems. 

Payroll automation is an especially advantageous feature of payroll software, as a delayed payment can lead to serious financial trouble for some employees, increasing stress and anxiety. It can also be a hassle for the business to correct. 


With payroll software, HR doesn’t have to punch in the same information time and time again. Instead, the software itself will communicate with your business’ other platforms, grab the necessary data and synchronize as needed. 

Establishing integrations between different applications and services takes just a few minutes, but it will save your business countless hours – not to mention many payroll errors. Here are some of the services commonly integrated into payroll software:

  • HR software and platforms 
  • Accounting software 
  • Bookkeeping software
  • Time tracking
  • Expense tracking
  • Shared workspaces
  • Word processors
  • Call and video communication

Some payroll software tools also offer integrations with well-known banks to support direct deposit. Of course, every software option is different and will have its own abilities and advantages. 

It may sound counterintuitive, but it’s essential to take the time to review the different app integrations offered by a payroll software tool before committing to it. Spending time to carefully select the best software option for your business will save time and money down the road. 

Wide-Spread Applicability

Whether a company is large or small, the advantages of payroll software are much the same. 

The underlying difference is which software includes the features a company deems necessary. For example, a small business might only need assistance with payroll calculations, while a corporation may need advanced integration and international compliance. 

In 2017, the National Small Business Association published a Taxation Survey showing that most companies with six or more employees paid for payroll software services

Employee Payroll Access

Employees are usually given login credentials to access their company’s payroll platform, enabling them to review and change their personal information, such as phone number and preferred payment method.  

Primary Beneficial Features

Every payroll software product will be different, but businesses can expect most services to provide assistance in the following ways:

  • Calculate employee wages, taking into consideration:
    • Deductions 
    • Payroll tax filing, including:
      • Federal income tax
      • State and local taxes
      • Federal Insurance Contributions Act (FICA) taxes, which include social security taxes and medicare taxes
    • Retirement 
    • Insurance
    • Wage garnishments
  • Automated, punctual payments 
  • Track and retain all payroll records
  • Organize employee compensation records
  • Support legal compliance 

Supplementary Beneficial Features

Payroll software can also do so much more, and it’s essential for employers and HR teams to familiarize themselves with the available features. Only then can they choose the best tool for their business and their needs. 

Here are the main benefits and most sought-after features: 

  • Easy configurations and modifications
  • Integrations with other business processes and software applications:
    • Accounting software and time-tracking software
  • Supports multiple payment methods:
    • Hourly, salary, gig work, etc.
  • Global payroll compatibility accommodations 
  • Employee access to paycheck information 
  • Mobile compatibility
  • Paycheck calculators 
  • Access to required tax documents and employee forms:
    • W-2
    • W-9
  • Regular synchronization with regulations to ensure compliance
  • Customer support 
  • Financial insight and analytics 
  • Security
  • Recordkeeping:
    • Payroll records
    • Tax information
    • How wages and pay scales are determined
  • Produce payroll reports
  • Supports employee onboarding

Recordkeeping and Legal Compliance

Recordkeeping is an essential element of any business’s HR duties, and while companies always have the option of storing their records at their physical office location, recordkeeping via a payroll software service is often the wiser choice.

Various government agencies institute federal laws detailing the latest recordkeeping requirements, so businesses must maintain proper records and documents to handle issues that may arise. This could be an internal dispute between an employer and employee, or external disputes between a company and the government. 

This potential for compliance issues is where payroll software presents businesses with a substantial advantage. 

Internal Disputes

On a local and internal level, reliable record retention has several benefits. For starters, proper recordkeeping greatly reduces a business’s chance of running into disputes with employees. In the event of an underpayment, for instance, the parties can simply look to the records to find the inaccuracy. 

Additionally, payroll software applications enable business owners to verify all sorts of details on employee compensation and tax deductions. Payroll software systems also allow companies to provide copies of any payroll-related document upon employee request. 

External Disputes 

Payroll software’s recordkeeping features also facilitate any processes that require access to financial and budget-related records, such as a merger or audit. The Internal Revenue Service, or the IRS, can deny tax deductions if a company being audited is unable to provide necessary documentation. 

Business must abide by the following legal recordkeeping requirements:

Equal Employment Opportunity Commission

The Equal Employment Opportunity Commission, or EEOC, requires all businesses to keep all employment records for at least one year before disposal.

Age Discrimination in Employment Act

The Age Discrimination in Employment Act, or ADEA, requires that payroll records are kept for a minimum of three years. Any documents detailing employee benefits must be kept for the duration of their employment, plus one year after the relevant employee’s termination.

Fair Labor Standards Act

The Fair Labor Standards Act, or FLSA, requires that business owners keep payroll records for three years.

International Revenue Service

The International Revenue Service, or IRS, recommends that all payroll records are stored and maintained for six years. 

Keep in mind that if your business provides records to the IRS that contain errors, the IRS may decide to dive deeper into your records and perform a more thorough audit. There’s no doubt that accurate, reliable recordkeeping is crucial to smooth business operations.

Cloud Payroll Software Systems

While a business can manually establish and maintain a payroll system that is located on-site, a cloud-based payroll software application is generally the best choice. Though it’s up to each company to choose its preferred route, cloud-based software tends to be cheaper and less cumbersome. This alone makes it easy to understand why manual payroll systems are strongly discouraged. 

On-premises payroll software systems require the business to have an on-site server and are typically more expensive because the business is paying to own the software. However, on-site software usually offers more service integration options. 

Cloud-based platforms are usually subscription-based and offer companies more financial flexibility. Additionally, cloud-based payroll systems automatically pull updates to ensure compliance with legal requirements. With more and more companies shifting to remote work and employees scattered in areas with different regulations, this feature represents a distinct advantage, particularly as not all on-premises software tools update automatically.

Varying Prices

It’s important to understand that payroll software tends to be reasonably priced, and is not just for big corporations. Even a new startup with no available funds can use payroll software. Depending on a company’s size and needs, a free payroll software application may do the trick. Popular free payroll tools include, eSmartPaycheck, and

For businesses with a larger budget, several tools are available for a monthly subscription of around $30 each month. But keep in mind that most charge an additional monthly fee for each employee, usually around $5-$10.


There’s no shame in admitting that running payroll manually is difficult! There are a lot of numbers to keep track of, laws to be aware of and calculations to be made – and all of it needs to be done on time and with full accuracy. 

Payroll software does all this and more, offering your HR team a great solution that saves considerable time and stress and minimizes mistakes. With the right software, your business, and HR team, will be ready to take on the world.