Choosing the Best Payroll Process for your Business

While an entrepreneur’s time is best spent focusing on running the business, payroll is an important consideration. Payroll must be completed accurately and in a timely manner, for the sake of employees as well as for the government and payroll tax payments. What starts out as a simple payroll process can turn more complex, depending on the business itself and its growth. In the beginning, a simple payroll software, whether online or locally installed, or a payroll service can likely handle the needs of a business quite nicely. As a business grows, so do its payroll needs. Here are five of the processes that can make payroll more complex, and may make a move to a new payroll system worthwhile.

Wage Garnishment

Wage garnishments can be extremely complex, and they can also vary greatly, since each wage garnishment is uniquely ordered for each case. Employers are required to comply with a court-ordered wage garnishment, and this can become extremely difficult if a payroll system cannot calculate the garnishment as ordered. Take this sample wage garnishment, for instance: a percentage of pay plus a fixed amount, with a cap. This is a complex calculation with three parts, and if it is unable to be calculated within a system, the calculations must be done manually. The more manual calculations there are to do, the more time that will be needed for payroll processing. Also, there will be an increased margin for error.

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Pay Calculations

Many businesses start out with just a few salaried and a few hourly employees, for which payroll is fairly easily processed. But what happens once commission pay is needed, or you start to have employees who earn via piece work pay, or even an added layer of detail: when employees perform different jobs with different pay rates on the same day or in the same week? These types of employee pay calculations become complex, and many payroll systems cannot handle this much complexity. Additional employee pay calculation methods that may make payroll more complex than a simple system can handle are overtime pay, and shift differential. Depending on the employer setup, these may also become difficult to track in a basic system.


Employee Payment Options

It may sound simple, but as an employer, you may prefer to pay employees in a certain way. Many employers pay via printed pay check, and others prefer via direct deposit, in which case pay is distributed directly into employee bank accounts, via ACH file transfer. Some employers go a step further with a paperless payroll, by giving direct deposit paid employees access to their pay information online, known as “electronic pay stubs.” What happens when some employees want to be paid one way though? For instance, what if some employees do not want direct deposit or they do not want a check? Having the option to pay employees in a combination of ways is a good way of keeping employees happy, and having a payroll system that accommodates that makes the process much easier.

Deduction Calculations

    Payroll deductions, or employee benefits, can be difficult to track with a basic payroll system. Some systems only come with standard deduction calculations, which cannot be customized to your own deduction needs. For example, you may want to offer accrued time off or a 401K matching option which is calculated by a percentage plus a fixed amount. Things like this may prompt you to find a system that can better handle benefits in the way your business wishes to have them calculated.

Multiple State Payroll

    • Growing companies often need to start paying employees in multiple states. If you have employees at your company from other states or who are working in other states, you will need to be sure that the appropriate amount of tax is paid to the correct state.  Not all payroll systems can handle this function, so it’s something to consider as a business grows.

Simply put, a payroll program should be a tool that can take away manual calculations and busywork when it comes to payroll. Once payroll is set up to calculate everything according to the needs of your business, you can spend more time focusing on the actual business, rather than worrying about payroll processing.

CenterPoint Payroll can handle the payroll complexities of a growing business. CenterPoint can be installed locally or used in the cloud. Please visit for more information.

Stephanie Elsen has more than 20 years of experience in working with small business, with 12 of those years at Red Wing Software, focusing on accounting and payroll. She loves to help businesses streamline their processes to make their operation run more smoothly. Stephanie is the marketing manager at Red Wing Software, a company that sells and distributes accounting and payroll software to companies across the United States.

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