A Guide for Businesses

imagesLooking for an online payroll service? Here’s everything you need to know about what an online payroll service is, what it offers and how to choose one. If you already know what you’re looking for, visit our best picks page to see which ones we recommend, as well as a complete list of others that might work for you.

Online Payroll

  • Online payroll services operate in the cloud and allow businesses to manage and run payroll from anywhere.
  • They can be used to pay full-time and part-time employees, as well as contract and freelance workers.
  • Online payroll typically includes a variety of services:
    • Payroll processing: Online payroll services automatically calculate how much employees should be paid each pay period. The systems take into account shift differentials, overtime, holiday pay and taxes, as well as Social Security and benefit deductions. They then make payments to employees by direct deposit or check.
    • File and pay payroll taxes: These services can withhold employee taxes, file quarterly payroll tax reports and pay tax withholdings to the proper state and federal agencies. In addition, they issue employee W-2 and 1099 forms at the end of the year.
    • New hire reporting: Many services report new hires to the government on your behalf.
    • Integration: Online payroll services can integrate with a variety of payroll-related programs businesses are already using, such as accounting software, time and attendance systems and human resources software.
    • Paid-time-off management: Many of these services manage paid time off by keeping track of how many vacation and sick hours employees have earned and how much they’ve used.
    • Employee self-service: Typically, employees are provided access to the system in order to view pay stubs, PTO balances and year-end tax forms.
    • Mobile access: Many systems offer mobile apps or mobile-friendly websites that let businesses manage and run payroll from smartphones or tablets.
    • Payroll reports: Most systems offer detailed wage and labor reports that provide a deeper look at how a business operates.

Pros and cons: The biggest benefit of online payroll services is that all of the work — payroll calculations, payroll tax payments, year-end tax forms, etc. — is completed for you. Payroll can typically be run in just several minutes. This saves you a ton of time and effort. One downside is that using an online payroll service is more expensive than handling payroll on your own. Another potential negative is that you are entrusting the payroll provider you choose to get everything right. If the provider makes a mistake, you may face a rash of angry employees or a fine from the government. Also, if you are in an area with spotty internet service, an online payroll provider will likely not be a fit for you.