Bringin' home the cyber-bacon

If you've got employees, you've gotta pay them! And if you've ever researched how one pays employees in the USA you'll know its an insane paperwork nightmare. Usually companies hire a person (HR) or company (ADP/Paychex) just to do payroll! We wanted to hire people but keep the system simple and managable. After much research we decided to go with Paycycle (it was a close race between Paycycle and Sure Payroll, they're both very good!)
Usually, companies go with a payroll provider such as ADP. They're massive companies that handle everything for you, but it comes at a price. You'll often end up paying for "extras" such as direct deposit, or printing and mailing a W2. For example, say you have 10 employees, you'll pay about $100/mo for the service and then $50 at the end of the year for sending W2s. They're also set up best for companies that are not tech savvy. For example, they actually call you on the phone (!) to get the payroll information every other week. For large companies it may make sense to go with a service, but for a small business its a bit of overhead.

It used to be that when you did payroll, you would have to pay the withheld taxes of your employees on a schedule and that schedule was very very strict. So you'd end up with people driving to the bank to file the tax payments every friday. Luckily, in the last decade or so, governments have modernized so that state and federal taxes can be paid electronically (EFT) and its very simple to do so.
Since we signed up for Paycycle, it was acquired by Intuit which kinda sucks because now its just another way for Intuit to try to sell you extra services. Surepayroll was also recently acquired by Paychex so yeah, probably the same there. Still, the online services are better and cheaper than ADP.

One of the things that make it cheaper for you to use an online service is
  • No human involved other than you.
  • You are responsible for electronic tax payments on the deadlines. Not a big deal if you can click a button when the email reminds you to but if this is not something you're good at, the fines can add up on late tax payments!
  • You have to remember to send/give out W2s. It's again not hard, but you'll need to remember to do it.

Things to look for!

There may be a few things to keep in mind when getting an (online) payroll service:
  • Does it take care of federal tax calculations for you? It's very likely.
  • Does it take care of state tax calculations for you? Check! for NYS there are approxmately 230,948,723 local taxes you have to pay!
  • Does it do direct deposit for free? Writing checks sucks and is error prone. Everyone likes DD because you get the money much faster.
  • Does it export nicely into your accounting software? Paycycle does the liability splits on each paycheck, a godsend at the end of the year when its time to zero our liabilities.
  • Can you enter payroll data online? Stuff like reimbursements, overtime, bonuses are also good.
  • Does it send you nice email reminders? We use inboxes as todo lists so this is nice.
Crunch numbers to make sure that you're not spending too much. With paycycle we're paying about $50/mo for 10 people, and thats it. Everything else is free and payroll takes only 15 minutes every other week with no issues. Since we signed up over 3 years ago, offerings have probably changed so do research to determine what is available!

This guide was first published on Feb 27, 2013. It was last updated on Feb 27, 2013.

This page (Payroll Software) was last updated on Feb 20, 2013.

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