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Choosing the best payroll system for your business

Alexandre Diard

The right payroll system lets you efficiently tackle all of your payroll activities, including timekeeping, wage calculation, withholding, payroll accounting, and payroll tax reporting. The wrong payroll system is laborious and leads to payroll mistakes. It is important to evaluate the payroll system you're currently using and decide whether it's right for your business or if another payroll system might optimize your payroll better.

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On-premises payroll system

Do you have more than 25 employees? Is it financially feasible for you to maintain an on-site payroll team? If so, you may select an on-premises payroll system, which means that the software is installed and stored on an in-house server.

This payroll system option simplifies payroll management — because the entire system is computerized — and enables you to rely on a dedicated in-house team. For best results, the payroll system should be integrated, so that information flows seamlessly from human resources (HR) to payroll. On the downside, an on-premises payroll system can take a toll on your finances. You not only have to compensate an entire payroll and HR team, but also have to pay for the server hardware as well as in-house IT support.

Often, it is more effective to outsource your payroll and HR needs to a professional.

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Cloud-based payroll system

Also called Software-as-a-Service (SaaS), cloud-based HR and payroll systems can be used by employers of all sizes, although studies have shown that they currently are being used mostly by smaller businesses. (A 2017 report by ISG Insights reveals that more than half of all employers will use cloud-based or hybrid solutions for human resources purposes by 2020, more than twice the amount that currently do.)

A cloud-based payroll system is housed in the cloud, or over the Internet, at the vendor's data center rather than on the business' in-house server. Employers are flocking to the cloud because of its cost-effectiveness and scalability. For example, no software needs to be installed and the SaaS vendor provides IT support. These payroll systems also have integrative capabilities that combine HR and payroll functions into a unified solution, which streamlines the HR and payroll process while reducing administrative errors.

Do you know what's best for your company? The answer depends on your size and the complexity of your HR situation. Most companies want to focus on their area of expertise, and choose to use a professional payroll service provider. The right payroll system could see your company really take off.

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