Choosing the Right Payroll Service for 2025: Key Features to Prioritize

While it might seem isolated, payroll has the power to impact several aspects of your business, including compliance, operational efficiency, and - most importantly - employee satisfaction and engagement. So, getting payroll right is vital to your company's ongoing success. As your business grows and evolves and regulations and technologies continue to change, selecting the best payroll service for your business will help to set you up for success in 2025.

How to Start Choosing the Right Payroll Service: Understand Your Business's Needs

The first step in choosing a payroll service is having a clear understanding of your business's needs. To determine what your business requires from a payroll software and/or payroll service provider, you should consider the following:

• Your business's size
• The current number of employees
• Your business's growth projections
• The number of positions you will add in the near future

In addition to considering the specifics of your business, you should also think about any industry-specific requirements to which your business must adhere for compliance purposes. For example, tip calculations in food service and hospitality businesses, overtime and time-tracking in construction, specific regulations that apply to healthcare, or other industry-based rules that impact payroll.

Once you know your business's needs, you will be better able to assess payroll service providers based on your list of must-have features, services, and experience.

Payroll Software vs. Payroll Provider

Business leaders should also make note of the difference between payroll software and payroll service providers.

Payroll Software

Payroll software provides tools to help businesses take an in-house approach to payroll management. Software solutions range from simple to complex; they can be paired with separate applications for expanded use, and they can be used to automate certain processes. While these tools can help improve your payroll system, they do not offer advice, they cannot process payroll for you, and they only provide limited protection with regard to regulatory compliance.

Payroll Services

Payroll providers offer full-service payroll processing. They provide or collaborate with businesses within their accounting systems and payroll software. They offer expertise regarding the most efficient systems for tracking time, achieving compliance, and maximizing efficiency.

They have extensive experience and expertise from which business leaders can benefit. As an outsourced payroll department, payroll service providers can function as a virtual extension of your business.

Which Is Right for Your Business?

Whether your business requires payroll services or can operate with its own payroll software and in-house bookkeeping department depends on several factors, such as:

• The size of your business
• The number of employees on the payroll
• Your ability to maintain compliance
• Ability to achieve adequate separation of duties and checks and balances within the bookkeeping department

Often growing small and medium-sized businesses (i.e. businesses that can't yet afford a full-time, in-house, three-person accounting department) can benefit significantly from outsourced payroll services in addition to payroll software.

5 Key Features to Prioritize in a Payroll Service

When choosing a payroll service, look for an emphasis on the following features:

• Automation - Payroll services should automate manual processes such as direct deposits, tax filings, and employee record-keeping.
• Compliance Support - Outsourced services should ensure adherence to tax laws, ACA reporting, and industry-specific regulations.
• Integration - Your payroll service provider and the software they use should be compatible with your existing business software (human resources, accounting, and time-tracking).
• Employee Self-Service - A payroll service provider should streamline employee access, allowing them to easily view their pay stubs, tax documents, and benefits information.
• Scalability - Look for a service provider that is right for your business now and your business in the future. Choose a provider that will be able to scale your services as your business and its needs expand.

Payroll Service Comparison: How to Evaluate Providers

When you have found a list of providers that offer the necessary services and features, you should consider the following aspects of the provider to narrow down your list and choose the payroll partner that will be right for your business:

• Cost Transparency - Look for a provider that offers transparent pricing. You should have a clear understanding of how much you will be paying and what services and features you will receive in exchange.
• Customer Support - Good communication is the foundation of every good relationship. A service provider with real, human customer support that is easy to reach is invaluable - especially during this new age of chatbots and artificial intelligence.
• Reputation - Read reviews and client testimonials to get a feel for others' experiences.
• Industry Expertise - Look for a provider who has experience working with other clients in your industry.

Trying out providers that offer free demos or service trial periods can also be advantageous. Not only do these deals save your business a bit of money, but they also allow you to make sure that a provider is a good fit before you sign any contracts.

Making the Transition

Transitioning to a new payroll system and service should be carefully planned to minimize challenges. Plan to transition during a slow period, work with your IT department to ensure a smooth data migration, and implement a plan for employee education, training, and communication to maximize buy-in.

Simplify Your Small Business's Payroll With Expert Support

The right payroll solution for your business should align with your business's needs, size, and industry - without breaking your budget. Look for a service that offers comprehensive features for compliance support, automation, and seamless integration with your existing business tools.

Streamline your payroll with Payroll Freedom’s feature-rich online payroll services to prepare your business for success in the new year. Learn more and get started here.