What Is a Payroll System? | Benefits for Small Business & More

What Is a Payroll System?

When you have at least one employee, you must have a way to run payroll. You must accurately pay employees, remit and file taxes, and keep records.

A payroll system can help you manage your business’s payroll. Use this introduction to payroll systems to answer your payroll system FAQs.

What is a payroll system?

A payroll system is software you can use to run payroll. The system can be desktop software you install on your computer or cloud payroll software you can access anywhere with an internet connection. Payroll systems generally handle all payroll tasks, such as time and attendance tracking, wage calculations, employee payments, and tax payments and filings.

What can a payroll system do?

You know what a payroll system is, but what is a payroll system able to do for your small business? A payroll system can help you complete most or all of your payroll tasks, including:

  • Calculate payroll taxes
  • Print payroll checks
  • Use direct deposit
  • Print Form W-2
  • File Forms W-2 and W-3
  • Deposit for federal, state, and local taxes
  • File for federal, state, and local taxes
  • Store payroll records
  • Track employee time
  • Manage multiple money types, like tips and commissions
  • Subtract additional deductions

What can payroll software do? Infographic

Your payroll system might be able to do even more. For example, you might have the option to offer an employee self-service portal to your workers. This lets them manage some of the payroll tasks, such as submitting time cards.

Do you have to do payroll system upkeep?

You might have to do some upkeep for your payroll system, depending on what kind of payroll system you use.

If you use desktop payroll software, you will have to do regular updates. You will have to download the updates, or possibly have to purchase and install a new version of the software. If you miss an update, your payroll might be inaccurate. The tax rates might be wrong, or there could be other issues.

If you use online payroll software, you do not do updates. Because the software is in the cloud, the software company can automatically do updates. You don’t have to download or install anything because the updates are available as soon as you log in. With online payroll software, you don’t have to worry about out-of-date tax rates.

The benefits of a payroll system

Using a payroll system to run payroll has many advantages.

First, payroll systems are often cost effective for your business. They tend to be cheaper than hiring a staff accountant.

A payroll system can also reduce the amount of time it takes you to run payroll. If you run payroll by hand, you have to manually do all the calculations, tax withholding, and tax filing. But with payroll software, the system does those tasks for you. You simply need to make sure employee hours and other numbers you enter are correct before you submit your payroll.

Using payroll software can help you eliminate errors in your payroll. The software will accurately do all calculations for you. You don’t have to worry about punching the wrong number into your calculator, or completely forgetting a step. When you don’t have payroll errors, you have reduced odds of being sued or receiving penalties in the future.

Running payroll with software is secure. The software company should handle encryption and other security features. You don’t have to worry about hackers, viruses, and lost data.

How to choose a payroll system

There are a lot of payroll systems available for your to choose from. Here are some things you should think about before choosing a payroll system.

Number of employees

The system you choose must be able to handle the number of employees you have. Some systems are designed for small businesses while others are better for larger businesses. Because you have fewer employees, look for software that will meet your needs without unnecessary big business bells and whistles. You should also consider the future of your business. Will the software still work for you if you add five more employees? What about 10? Think about how the software will grow with your business.


Payroll systems come in a wide range of prices. Make a budget for yourself so you don’t overspend on the software. Also, software companies charge their customers differently. Some will charge you based on the number of payrolls you run. Others will charge you based on the number of employees you have.


Some employers are willing to handle tax deposits and filings themselves. But others don’t even want to touch taxes with a 10-foot pole. Some payroll software companies will handle payroll taxes for you, so make sure your system has this feature if you want it.

Special needs

Some businesses need special features, such as particular payment types. List out your must-have features. Before you purchase software, make sure it can do everything you need it to do.

Are you ready to start using a payroll system? Try Patriot Software’s online payroll software for small businesses. It’s all in the cloud, meaning you don’t have to do updates. We guarantee accurate calculations. And, when you use our SaaS payroll services option, we’ll even handle tax deposits and filing for you. You can test the software for free. Start your trial now.

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