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The Top 6 Features Every Payroll System Needs

William DawseyBy: William Dawsey


Payroll. In offices globally, it often isn’t a word with a very positive connotation. So much so that Human Resource (HR) departments and payroll departments, in particular, dread the day it rears its head on a weekly, bi-weekly, or monthly basis.

Luckily, for nearly every administrative problem, there is a software solution. And to transform their payroll-related administrative nightmares, companies are looking for the payroll software of their dreams.

Although there are many software solutions available, not all of them have the ideal payroll-related functionalities that streamline the many and varied processes involved—especially since payroll doesn’t just encompass wage payments alone. From compensation administration automation to payroll tax management, there are a host of different features that payroll software needs to have to be considered a robust, complete system.

1. Compensation Administration Automation

An automated system that updates with changes in compensation is one of the most crucial features of a robust, complete payroll solution. After all, the whole idea behind automation is to improve tedious and time-consuming processes. Otherwise, HR and payroll departments would all be happily accomplishing tasks with paper, pens, and endless walls of filing cabinets.

Compensation administration automation features go well beyond the basics of payroll and wage management to handle everything from worker’s compensation, bonuses, and adjustments for changes in minimum wage or cost of living to managing Flexible Spending Accounts (FSA), Health Savings Accounts (HSA), Health Reimbursement Arrangements (HRA).

Eliminating the need for manually tracking employee leave through email chains and spreadsheets, the system will notify HR managers when an employee goes on leave. And as there are many different types of employees (salaried, hourly, and contracted workers), there are different ways that wages need to be calculated (pay type, pay frequency, bonuses, reimbursements, voids, and deductions)—all of this being accomplished by compensation administration automation features.

Not only does this feature ultimately save HR departments time that is usually spent manually updating employees' gross pay or performing calculations, like any good software, automated features also greatly increase efficiency and reduce manual errors.

2. Interoperability with Other Systems

If you haven’t heard the news, let me be the first to tell you that organizations aren’t interested in systems that don’t work with the various tools and platforms they regularly use. Payroll departments shouldn’t have to use—and honestly won’t be interested in—systems that don’t consolidate all the different programs used in such important processes like the ones involved in payroll.

Especially pertinent for organizations that require a complex payroll system that can communicate with their HR-related (or otherwise equally important) software, interoperability will ensure that different applications, modules, and systems communicate and transfer important decision-influencing data.

With a payroll system that supports integration, organizations will easily leverage the combined power of multiple systems such as:

And since there will be no concern about separate interfaces, integrated systems are a real time-saver for companies’ IT staff when the time for implementing changes to the software solution comes around.

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3. Payroll Reporting

Many businesses face the problem of not having an effective way to monitor employee hours and wages. While having payroll software system-supported integration is fantastic if organizations can't produce payroll reports, what's the point of it all?

With a payroll reporting feature, payroll systems aggregate information regarding business budgets, taxes, workers’ comp, and other important payroll data. Reports, generated from either its own proprietary reporting function or through BI tools, then provides businesses with a high-level overview of payroll-related information accessed through reporting dashboards.

Particularly useful for small and medium-sized enterprises, this feature allows them to overcome issues related to a lack of insight into their payroll data. With BI tools that gather both historical and real-time data, organizations can identify trends for future decision-making regarding payroll.

BI tools for payroll reporting are also popular among larger enterprises that monitor a large number of employees and therefore have an extensive and complicated payroll process.

Automating such processes allows businesses of all sizes to stay on top of their reporting—whether outsourced or completed internally. It is also useful for organizations that are interested in analyzing their payroll expenses to compare them with cash flow.

4. Mobile and Employee Self-Service

Employees should have easy access to their compensation information. Without a way to access this information, they have to go through HR and wait for them to respond. This lack of access makes finding out wage information or updating tax information a strenuous process that adds to the already heavy HR workload.

Employee Self-Service (ESS) capabilities, instead, give employees instant access to information about their wages and more without the need to go through HR. With mobile portals, employees can access:

For organizations with multiple office locations, mobile ESS that allows access to payroll-related information is essential, especially if HR is off-site or (as it’s becoming more common) if the company employees work remotely. Rather than forcing HR to focus on clerical duties, employees can update their payroll information on their own such as home address and bank and routing information from anywhere.

5. EFT Capabilities

When it comes to how employees get paid, none wants to take a paper check to the bank anymore. Besides the risk of losing said check or the possibility of check fraud, it’s an unnecessary expenditure for companies to constantly be cutting checks, stuffing envelopes, and distributing them to employees.

Instead, a practical payroll system with Electronic Funds Transfer (EFT) features can skip the literal paper trail to send wages directly to employees. Utilizing Automated Clearing House (ACH) systems, payroll software accesses electronic networks to enable direct deposit—depositing funds directly into the account an employee has within a financial institution.

The ultimate win-win situation, EFT solutions streamline billing, customer management, secure database management, and customize reports and insights all while saving employees a trip to the bank. And for companies trying to go green, the elimination of paper checks can only benefit the environment.

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6. Payroll Tax Management

One of the main goals of payroll software is to ensure that there are no tax issues when it comes to employee wage calculations. To avoid mistakes that basically amount to tax evasion on the part of the company, payroll software needs to include payroll tax management applications.

Completely eliminating the risk of tax-related penalties for a business, tax management applications:

Along with accurately and efficiently creating tax documents and populating them, payroll tax management applications send the forms to the applicable agency, automating the entire process without unnecessary oversight.

Building Robust, Yet Compliant Systems

When it comes to payroll software, solutions are only as useful as they are compliant. Not only do systems need to meet organizational needs, but there are also a host of organizations that require strict adherence when dealing with sensitive information regarding taxes or insurance.

To avoid business draining penalties, while facilitating a streamlined payroll process, systems that include features such as reporting modules—such as those for Affordable Healthcare Act (ACA) compliance—position businesses small and large to maintain good legal standing.

Payroll software requires integration with and certification by the US Department of Labor's (USDOL) State Information Data Exchange System (SIDES). And only developers with vast industry knowledge are going to be the ones to assure this vital compliance.

While no payroll system is the same, (on the business side) landing on which one will fit a business’s needs shouldn’t be difficult. System that provides all the latest and greatest functionalities while following regulations are the most desirable let alone the most useful. Streamlining payroll to get employees paid may be the end goal, but that can’t be accomplished if guidelines aren’t followed along the way.


Chetu, Inc. does not affect the opinion of this article. Any mention of specific names for software, companies or individuals does not constitute an endorsement from either party unless otherwise specified. All case studies and blogs are written with the full cooperation, knowledge and participation of the individuals mentioned. This blog should not be construed as legal advice.

Chetu was incorporated in 2000 and is headquartered in Florida. We deliver World-Class Software Development Solutions serving entrepreneurs to Fortune 500 clients. Our services include process and systems design, package implementation, custom development, business intelligence and reporting, systems integration, as well as testing, maintenance and support. Chetu's expertise spans across the entire IT spectrum.

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