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What is Payroll Software?

Written by:

Coralee is a business writer with experience in administrative services, education, and software testing.

Reviewed by:

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

What is Payroll Software?

What is Payroll Software?

Running payroll involves loads of employee and accounting information that HR professionals need to dig up, compile, track and store. Even with a small staff, payroll can quickly get complicated and tedious. That’s why so many businesses turn to payroll software – a simple solution to help HR manage and automate payroll, instead of getting overwhelmed.  

Advanced payroll software tools support HR from start to finish, providing hours’ tracking and recordkeeping and ensuring accurate calculations and payouts. With reliable payroll software, you and your HR team will have more time for more urgent business matters. 

Payroll Software vs Payroll Service Providers

Payroll software and payroll service providers are very similar and are often used to refer to the same thing. In fact, some payroll service providers offer payroll software for purchase, or subscription. However, some payroll service providers also offer businesses the option to externally perform and run payroll processes on their behalf.

What Does Payroll Software Do? 

Payroll software enables businesses to accurately compensate employees on schedule and maintain comprehensive payroll records. The software integrates with other business processes and systems, such as tools that track employee hours worked. 

As a result, payroll software complements software a business is already using, such as HR platforms and accounting tools. Some payroll software services also offer integrations with well-known banks to support direct deposit. 

Ultimately, the software aims to facilitate payroll and simplify the entire process for HR. 

What Businesses Should Use Payroll Software? 

Payroll software is not only beneficial for big corporations; small businesses can leverage these tools as well. In fact, a recent taxation survey from the National Small Business Association states that most companies with six or more employees use payroll software. 

Whether a business is large or small, the benefits are largely the same, though companies may choose to use different software tools. For example, a small business might only need assistance with payroll calculations, while a corporation may need advanced integration and international compliance. 

Who Benefits From Payroll Software? 

Employers and HR professionals engage the most with payroll software, but that doesn’t mean other employees will never use it. Payroll software benefits all!


Good payroll software ensures that employees will be paid on time and receive the correct amount. This is a critical feature of a payroll software service, as some individuals live paycheck to paycheck, and a delayed or incorrect payment can cause real problems. 

Employees are also typically provided with access to the software, which allows them to change the information they have on file, such as their phone number or how they would like to receive payment. 


Running a business involves a lot of moving parts, and more employees means more information to track. This adds up fast, even for a small business. Payroll software takes a lot of the time, guesswork, and stress out of running payroll, while helping avoid costly mistakes that may be difficult to resolve. 

businessmen discussing about calendar

What Primary Features Does Payroll Software Provide?

Every product will be different, but you can expect most payroll software services to include the following:

  • Calculate employee wages, taking into consideration:
  • Automated, punctual payments 
  • Track and retain all payroll records
  • Organize employee compensation records
  • Ensure legal compliance 

What Other Features Does Payroll Software Offer? 

Every payroll software application is different and offers its own advantages. But here are the main benefits and most sought-after features: 

  • Easy configurations and modifications
  • Integrations with other business processes and applications:
    • Accounting and time-tracking software
  • Supports multiple payment methods:
    • Hourly, salary, gig work, etc.
  • International compatibility 
  • Employee access to paycheck information 
  • Mobile compatibility
  • Paycheck calculators 
  • Access to tax documents and employee forms:
    • W-2
    • W-9
  • Regular synchronization with legal regulations to ensure compliance
  • Customer support 
  • Financial insight and analytics 
  • Security
  • Recordkeeping features:
  • Produces payroll reports

Is a Manual or Cloud-Based Payroll System Better? 

Payroll software can be manually established and maintained at a company’s place of business, or it can be based in the cloud. Though it’s up to each company to choose its preferred route, cloud-based software tends to be cheaper and less cumbersome. 

On-premises payroll software systems require the business to have an on-site server and is typically more expensive because you’re 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 only some on-premises software options update automatically. 

Is Payroll Software Difficult to Learn and Use?

Some payroll software tools are easier to use than others. Once a business has determined which features it most needs, a smart next step is to find the services that also provide digital training tools. 

computer payroll software

Is Payroll Software Expensive?  

Depending on a company’s size, a free payroll software application may do just fine. Free payroll tools include, eSmartPaycheck, and

Several software options are available for a monthly subscription, and many average are available for only about $30 a month. Of course, there are more expensive options, as well. However, keep in mind that most payroll software tools also charge an additional monthly fee for each worker, usually somewhere between $5 and $10 per employee. 

For example, Onpay offers companies access to their software for a monthly subscription fee of $36 plus $4 per employee, while Gusto’s monthly base fee is $39 a month in addition to $6 per employee. Paychex, however, charges a $59 monthly fee along with $4 per month for each employee.


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.