What is Payroll Software and Why Should Businesses Use One?

As a business owner, it can be difficult to manage the accounting and payroll tasks by yourself (not to mention time-consuming!) Payroll software is designed to help business owners manage and automate these tasks, making the process easier and more efficient.

a one dollar bill

There are many different types of payroll programs available on the market, so it’s important to do your research to find the right one for your business. The most common features of payroll software include:

Tracking employee hours worked

This is essential for ensuring employees are paid the correct wages for the hours they have worked. Payroll applications can automatically calculate overtime pay and other related wages.

Generating payslips

Payslips not only provide employees with information on their pay, but they also help to ensure that the correct tax and social security contributions are paid.

Calculating taxes

Payroll software can help businesses to ensure they are paying the correct amount of tax, both at a national and state level. This can be especially helpful for businesses that have multiple branches or locations.

Managing employee benefits

Many payroll app packages include features that allow businesses to manage employee benefits, such as healthcare and pensions. This can make it easier to keep track of who is eligible for what benefits (such as sick leave or long-service leave) and ensure that everyone is paid the correct amount.

If you’re interested in moving from a manual payroll system to automated software, this page has all the information you need. Keep reading or click through the topics below to browse:

two employees talking about payroll software

What is a Payroll System?

Every business must pay its employees fairly under the law, and therefore, every business has some kind of payroll system in place. But what is a payroll system, exactly?

A payroll system is a set of tools and processes that allow businesses to track employee hours worked, calculate wages, pay employees, and file taxes. It’s incredibly important that these systems operate smoothly and accurately, or else employees can be over or underpaid and disputes may arise.

There are a few different types of payroll systems: manual, computerized, and cloud-based. The most popular type of payroll system is computerized, and there are many different software options businesses can choose from.

Payroll software is a computer program that helps businesses automate their payroll tasks. It can automate tasks such as calculating wages, tracking employee hours, printing paychecks, and filing taxes. Software is becoming increasingly popular as a payroll system for its time-saving automation, among other benefits.

What is Payroll Software and How Does it Work?

Payroll software is a tool used by businesses to process employee payments, calculate and track employee hours, and file tax paperwork.

In other words, it automates the payroll process for businesses. Payroll software can make things easier for business owners by handling all of the calculations and paperwork related to employees’ paychecks.

payroll software running on a laptop

Payroll software usually comes in the form of a desktop application or a web-based application. The software works by connecting to a company’s bank account and employee records, then processing payments and tracking hours.

To use payroll software, business owners simply need to input employee hours and wages, as well as any taxes or deductions that need to be taken into account. The software will then do the rest, including printing paychecks, filing tax paperwork, and issuing payments.

Payroll software has a fairly simple structure. It works by

  1. Collecting and organizing employee time-and-attendance data;
  2. Determining wages, salaries, deductions, and other payments owed to employees;
  3. Printing paychecks or issuing payments via direct deposit; and
  4. Generating periodic reports detailing employee earnings, hours worked, and other information.

There are a number of different payroll software programs on the market, but all share these basic features. Some programs also offer additional features such as online pay stubs and tax filing.

How it works

When an employee is hired, their name and Social Security number are entered into the software. As the employee works, their hours are automatically tracked. At the end of each pay period, the software will calculate how much the employee has earned and create a pay stub for that period.

Tax deductions and employer contributions to benefits, such as health insurance, are automatically calculated and subtracted from the employee’s gross pay. Businesses can use payroll software to manage employees’ withholdings and contributions to 401(k) plans as well.

Some software can generate reports on employee absences, overtime hours worked, and other data that businesses can use to measure employee productivity.

Payroll software is a helpful tool that businesses should consider using to streamline the payroll process. There are many benefits to using the software, as you’ll see further down.

a person using payroll software on their tablet

The Benefits of Payroll Software

There are many ways that businesses can benefit from using payroll software. For example, payroll software can help businesses save time and money. In addition, payroll software can also help businesses stay organized and compliant with tax laws.

Some of the main benefits of using payroll software in your business are:

Increased Efficiency

Payroll software can help businesses save time by automating many of the tasks related to payroll processing. This includes things like calculating wages, printing paychecks, and submitting tax payments.

Reduced Costs

Payroll software can help businesses reduce their costs by automating many of the tasks that would otherwise need to be done manually. This can include things like preparing paychecks, tracking employee hours, and filing taxes.

Increased Compliance

By using payroll software, businesses can ensure that they are in compliance with all applicable tax laws. This can help businesses avoid costly penalties and fines.

Improved Organizational Structure

Payroll software can help businesses organize their payroll information in a way that makes it easy to access and analyze. This can help businesses make better decisions about their business operations.

Enhanced Security

By using payroll software, businesses can protect their sensitive financial information from unauthorized access. This can help businesses maintain the privacy of their financial data.

At the end of the day, running a business is difficult enough without having to manage payroll and accounting on top of everything else. This is why businesses should use payroll software to help automate these processes.

Different Types of Payroll Software

Once you have decided to implement payroll software within your business, the difficult part is choosing which software type to purchase.

three people looking at payroll software on a computer

There are three types of payroll software, each with its distinct benefits and disadvantages:

Cloud-based software: This type is hosted on remote servers and accessed through the internet. It’s easy to use and updates are automatic, so you always have the latest features and security protections.

Desktop software: This type is installed on your computer and updates are manual. It’s usually less expensive than cloud-based software, but you’ll need to make sure your computer has enough memory and that the software is compatible with your operating system.

Software as a Service (SaaS): This type is hosted on remote servers, but it’s accessed through a web browser, rather than installed on your computer. It’s easy to use and updates are automatic. SaaS software is typically the most expensive option, but it can be worth the investment if you need access from multiple locations or devices.

So, which of the three should you choose? The answer depends on a variety of factors, including the size of your company, number of employees, and budget. Cloud-Based payroll software is becoming more and more popular because it has many advantages over the other two types.

First, cloud-based software is always up-to-date. The provider will automatically update the software with the latest tax rates, employer contributions, and employee deductions. This eliminates the hassle of having to update the software yourself.

Cloud-based software is also accessible from anywhere with an internet connection and is protected by many layers of security. This is a big advantage for businesses with employees who work remotely.

Whether you choose to go cloud-based or stay on your desktop, payroll software is going to greatly benefit your business in both the short term and the long term by cutting down on costs and wasted time. Your next job is to figure out how to make the most of your payroll software.

a laptop, a coffee mug, a notepad, a pen, and a smartphone on a wooden table

How To Make The Most Of Your Payroll Software

Purchasing payroll software for your business is one thing, but how do you make the most of your software? Follow these simple steps to implement your software properly and effectively:

  1. Ensure that everyone in your company understands how it works. All team members should be familiar with the different features of the software and understand exactly how to use it. This includes both employees and managers.
  2. Set up clear guidelines for using the software. This includes things like who is responsible for entering time worked and approved absences, who will pay employees, and how often paychecks are issued. Having a set of written guidelines will help avoid any potential confusion.
  3. Make sure the software is updated regularly with new tax laws and changes to employee benefits. This will help to ensure that your employees are paid accurately and in a timely manner, and will also keep you in line with government regulations.
  4. Use the software to its fullest potential. This means taking advantage of all the features it offers, such as online payments, automatic tax filing, and employee self-service. Utilizing all the features of your payroll software will help make running your business easier and more efficient.
  5. Regularly back up the software and your employee data. This will help ensure that your information is safe in the event of a computer crash or other disaster.

Of course, any new software you introduce to your company will be an adjustment. Allow time for all team members to get used to the new system and learn how to use the tools you’ve purchased.

The Best Payroll Software Available

Having trouble choosing which software to purchase? When it comes to choosing the best payroll software for your business, there are a few important things to consider.

two people using payroll software on their laptops

Different software providers offer different features and cater to businesses of different sizes, and most payroll software providers charge a monthly fee, so it’s important to find one that fits both your needs and your budget.

You’ll want to consider the features that are important to you and your business. For example, do you need software that can handle employee onboarding and tracking? Or do you need a solution that can help you automate tax reporting?

Once you’ve answered these questions, it’s time to start shopping for the best payroll software provider for your business. Here are a few of our favorites:


Gusto is a payroll software that is both user-friendly and efficient. It is perfect for small businesses as it has the ability to manage all aspects of your payroll, including tax filings and payments. Gusto also offers employees the ability to access their pay stubs online, making it a convenient option for both you and your staff.


ADP is one of the most popular payroll software providers in the world. It is known for its accuracy, efficiency, and comprehensive features. ADP can manage all aspects of your payroll, including tax filings and payments, as well as employee benefits and HR tasks. It also integrates seamlessly with Day.io.


Paychex is another well-known and highly respected provider of payroll software. It offers a wide range of features, including tax filing and payment, employee onboarding and management, and HR support. Paychex is perfect for businesses of all sizes.

Payroll Software: Bottom Line

Automating your payroll system by purchasing software will save you the time and hassle of managing the accounting process yourself. Did you know that you can streamline your business even further by also purchasing time tracking software?

At Day.io, we integrate seamlessly with payroll software to deliver a smooth and streamlined payroll process. Our time tracker allows you to see where your employees are spending most of their time and how they can alter their habits to be more productive.

Consider purchasing payroll and time tracking software today for a more successful and productive company where you can spend your time on the things that matter.