Top things to look for in a payroll service

Nick Stanley
by, Nick Stanley

Payroll is a big part of any business. It includes every employee, from paying and recording their salary or wages to calculating bonuses, benefits, deductions, taxes, and leave. 

It starts on the first day of employment and can continue after a person leaves, with the calculation of notice entitlement and your legal obligation to keep records.

In most companies, payroll is one of (if not the) largest expenditure item and it's every company's responsibility to ensure it's done correctly. Getting it wrong could affect staff morale, cost you money, and potentially put you in the law's crosshairs.

Instead of handling payroll in-house (as many large companies do), an increasing number of businesses are opting to use a payroll service provider that makes the process of running and tracking payroll simpler, quicker, more accurate, and in most cases, cheaper.

Options for payroll solutions abound, from full-service offerings to basic add-ons to accounting software, and it's worth taking to time to weigh up the choices so you get the one that is best for your company.

Don't rush. If you make the right call on your payroll service, it will contribute to your company's success, freeing you up to focus on your customers and building the business.

Here are some points to bear in mind when you’re looking for the right payroll package.

Online

In this day and age, using a web-based solution seems pretty obvious, but it’s a deal-breaker. If you’re not using an online service, you’re already playing catch-up.

Online payroll software gives you 24/7 access to, and control over, your payroll information, so you can easily update it or share it when you need to, e.g. with your accountant or Inland Revenue (IRD).

Having the storage of your payroll data handled by a trusted provider reduces potential payroll risks, removing the need to house it on your own systems and improving security. You won't have to limit the number of users or worry about expensive licence fees for each user, and you can easily control levels of access.

A good payroll service provider will make updates, fixes, and tax and other legislative adjustments immediately and remotely. This will save you loads of time and effort and give you peace of mind that your payroll is accurate and you're meeting your obligations.

You'll also need less in-house IT support.

Integration with your accounting and HR software

Unless you like double-handling information or manually processing and reconciling payroll, then getting a service that integrates with your existing accounting and HR tools is a great idea.

It will mean all your tools use the same data set, creating synergy between payroll, accounts, leave management, performance review and other HR processes.

You'll only enter employee details once, and your information will always be up-to-date and accurate, with less errors that can happen when you manually transfer data between programs.

Local compliance

We talk a lot about how stressful complying with employment and tax law can be for businesses, especially smaller companies.

Many aspects of payroll are covered by legislation, including PAYE, Kiwisaver, holiday pay, and Employer Tax Credits, and these laws frequently change.

A good payroll service provider will provide knowledge and oversight of current legislation and should ensure you're always compliant (beware of signing up with a service that doesn't have local expertise). Aside from saving you time and headaches, you'll also avoid any potential penalties and increased scrutiny.

Payday filing

From 1 April 2019, all NZ businesses that pay more than $50,000 annual PAYE and Employer Superannuation Contribution Tax will have to file payroll information to Inland Revenue electronically after every payday (known as payday filing).

Many companies still have manual payroll process, but after 1 April 2019 they will no longer be able to file paper earnings and tax information each month (unless their annual deductions are less than $50,000).

A good online payroll service should be ready for payday filing. Then, instead of having to upload your files every time you pay your employees, the software will send them to IRD automatically.

Find out more about payday filing at IRD.govt.nz

Ease of use

A good payroll system should make your admin load lighter, rather than adding to it.

The software should be simple to set up and use, and the transition quick and painless. If you need elaborate training, it probably means it's going to be tricky to operate, which means you'll be spending resources that could be employed elsewhere.

Think about your company's requirements – employee numbers, payroll complexity (e.g. variable rosters vs. fixed hours salaries), staff growth and turnover rates etc. – then find an offering that best meets them. You should have the independence to access and handle your payroll, while at the same time getting a service that does most of the hard yakka for you.

Technology is always evolving, too, so you should look for a provider that's active in improving their product (this includes security).

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Automation

When it comes to payroll, automation is your friend.

Look for features like automated timesheets, tax and leave-balance calculations, and direct deposit management, as well as relevant notifications and reminders.

Having automated payroll processes will save you time and reduce the chances of human error. Paying your employees correctly and on time will keep them happy, and meeting your tax commitments and deadlines will keep IRD off your back.

Self-service

Another feature to weigh up is how much of the payroll process staff are able to do themselves. The more people can do, the less admin your management team will have to do.

Your employees should get an individual profile, with access to their payroll information, including pay statements, schedules, and breakdowns. They should be able to fill in tax information, update personal details, and review and book leave (a good HR service should also do this).

Some providers offer the added convenience of an app that you and your employees can download.

Aside from lightening the workload, self-service provides transparency, so everyone in the business can see exactly where they're at. 

Scaleable

Unless you're really, really happy with your employee numbers and don't ever plan on the business expanding (unlikely, right?), using a web-based payroll solution will mean you shouldn't have to change systems as your company grows.

Choose a vendor that can handle your long-term needs. It should be easy to add additional users and employees to your account, and look at which other services can be added over time and how much they'll cost.

Suitable reporting and records

One of the benefits of online payroll solutions is their ability to keep records and create detailed reports, putting key financial and staff information at your fingertips so you can make informed decisions and best manage your business.

Obviously, the base function of a payroll system is to keep accurate, real-time records of your payroll operations and store them for tax and audit purposes (in NZ, you are legally required to keep payroll and accounting records for 7 years).

A good system will give you easy visibility of your payroll and employee information and should be data-rich and customisable.

Check to see what types of reports and dashboards payroll services offer and if you aren't an expert, your accountant should be able to give you breakdown of the ones you need and may want.

Support

A good payroll system should go hand-in-hand with good customer support.

Chances are, you’re a business owner not a payroll or tech expert, so you are going to need assistance and guidance at some point. You should expect live, in-person support via chat, email, or phone, on top of detailed website information and tutorials.

Support shouldn't only be forthcoming during sale and set-up; it needs to be ongoing. However, if you find you keep needing help, that means the product isn't doing its job. A web-based payroll solution should be reliable and easy to use.

New call-to-actionWord to the wise: do some homework

A poor payroll service can cause a whole heap of pain (Novopay anyone?), especially if it isn't well-built, proven, or simply doesn’t suit your organisation.

Do your due diligence before signing up. Make a list of what’s most important to your business and find a service that has the features to meet those requirements. Ask for recommendations from friends, associates, and your accountant. Look at user feedback and take up trial offers.

Communication with the vendor is key. They should be keen to know your company and your needs, and their services and pricing structure should be transparent (keep an eye out for expensive add-ons or hidden fees that may turn a bargain into a money pit).

Also be aware that the cheaper options may require to do a lot of processing work yourself, which will cost you time and expense in the long-run, and increase the risk of errors. A full-service offering will easily pay for itself over time.

Pro-tip: set it up right

Even when you’ve found the perfect, full-featured, fit-for-purpose, online payroll system, you (and the provider) need to take the time to properly set it up for your business.

We can’t overstate the importance of this step. We’ve seen plenty of problems with incorrect holiday pay calculations caused by poor payroll set-up and incomplete data being entered into a new system. If this happens, the payroll provider is not responsible for any errors and potential legal consequences, your business is.

Correct, thorough set-up will go a long way to reducing risk.

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