Payroll & Benefits Software: Subcategories and Top Products

Payroll and benefits software calculates pay, withholds and files payroll taxes, and manages employee benefits such as health plan enrollment, deductions and time off. Some products cover both in one system, while others specialize in payroll or benefits and connect to each other. The key test is whether a benefits election becomes a correct payroll deduction without manual work.

The best fit depends on how much work you want to keep. If you want to run payroll yourself, look for software with automated tax filing and simple benefits options. If you want someone else to handle payroll and offer benefits plans, compare payroll services and PEOs. In every case, check what is included in the base price, who handles tax errors, and how easy it is to leave.

Payroll service providers and accounting firms use payroll platforms built for managing many client companies from one account, with features such as multi-client dashboards, bulk processing and client approval workflows. If you are a business owner, the more useful question is whether your provider will let you see your own tax deposits and export your records if you leave.

A PEO becomes a co-employer and usually gives you access to its benefits plans and HR support, in exchange for an ongoing fee. Software keeps you as the sole employer and lets you choose your own benefits broker and carriers. A PEO suits employers who want benefits options and HR help without building them, while software suits those who want control and flexibility.

Yes. The IRS states that the employer is ultimately responsible for depositing and paying federal employment taxes, even when payments are forwarded to a third party. The IRS recommends that employers enroll in EFTPS themselves so they can check that their provider is making the deposits. Ask any provider how it handles errors and penalties it causes.

COBRA generally applies to group health plans of employers with 20 or more employees in the prior year. Under the ACA, an employer with at least 50 full-time employees, including full-time equivalents, on average during the prior year is an applicable large employer and furnishes Form 1095-C to full-time employees. Confirm your situation with a benefits advisor.

The FLSA requires employers to keep payroll records for at least three years and the records on which wage computations are based, such as time cards, for two years. The IRS asks employers to keep employment tax records for at least four years after filing the fourth quarter for the year. Check state rules too, and confirm your system keeps records of former employees.

Pricing is usually a monthly base fee plus a per-employee charge, a single per-employee rate, or a custom quote for larger employers and PEO contracts. Benefits administration, time tracking and ACA reporting are often priced as add-ons. Ask for an itemized quote that includes implementation, year-end forms, off-cycle runs and exit fees.