The bottom line is that everyone needs to get paid or your organization will shut down. How they get paid, however, is an entirely different matter.
Cash is a non-starter. The only questions that remain are if you hand them a check, direct deposit it, use a service that can do either one or go to the cloud for functionality.
Hiring a business or individual for bookkeeping and payroll services might make sense for small organizations. Larger organizations have accounting software that allows payroll to be managed in-house. An integrated system that includes payroll and HR functions, such as the storage of employee data, benefits management, and employee performance management, might be more efficient than separately managing each of these areas.
There are a number of things to consider when selecting software to manage payroll. A number of experts were consulted and their advice was condensed here.
A central part of payroll management is the movement of information. An employer must send employee data — often provided by the employees themselves — to a bookkeeper or payroll vendor to issue checks or deposit funds. Data must also be sent to government agencies for tax purposes.
Software installed on a local computer rather than accessed via the Internet used to be the norm and it comes with certain downsides. For example, every time the vendor updates the software, users have to download the updates and install them on their own. They also have to provide their own tech support to troubleshoot the software. In addition, access to the software is usually limited to the machines on which it is installed.
Cloud-based payroll services, which store information on their servers and allow access via a web browser, can simplify the management and transfer of data. Users can access it from any computer with an Internet connection, and the vendor manages updates and support.
An additional benefit many cloud-based systems offer is the opportunity for employees to log in and change personal data or input hours on their own, eliminating the need for their employers to collect and input this information manually.
Many payroll experts are also finding that cloud-based systems allow employers to meet the needs of younger, mobile, and information-hungry employees who expect to be able to get the information they need instantly and on multiple devices.
The basic functions of a payroll system include paying employees and reporting data to government agencies, but there are nuances to consider. Nearly every system offers direct deposit standard. Some provide check printing and reloadable pay cards, but might charge extra for these.
Time and attendance can be inputted in various ways across systems. Not all are user-friendly, intuitive, or flexible enough to meet the needs of organizations whose employees have complex work schedules. Integration with other financial software such as QuickBooks is often available, with many systems bundling financial and payroll management into one solution.
Beyond the basics, some systems offer customized features including general ledger and accruals, advanced report-writing, and custom integration with other software. Some systems also allow users to create custom templates and checklists. Self-service features for employees are becoming more common and some vendors even offer mobile apps that allow employees to input timekeeping and HR data.
There’s a wide range of pricing models for payroll systems, from those affordable for even the smallest nonprofits to enterprise-scale systems. Organizations with existing HR systems might find that add-on modules for payroll are more affordable and integrate better than a separate system.
Most vendors charge per-employee and per-processing fees in addition to a base rate. Some also charge for additional services per item. For example, a vendor might charge for W-2 processing or data transfer to a third-party flex spending account. There also may be penalties for not processing a payroll at a scheduled time.
Vendor support is one of the most important factors to consider in getting value out of a payroll system. Employees often bring unusual circumstances to their organizations, and a vendor willing to work with those nonprofits to find solutions can save a lot of time and headaches.
Most software will have glitches or occasional breakdowns. A responsive vendor can help HR professionals keep their data secure and make sure employees still get paid on time in the event of a system failure. Getting a good sense of how the vendors interact with organizations through software enhancements or a malfunction is just as important as any software feature.
Regardless of the size of the organization, cost and ease-of-use are the top concerns when choosing a payroll system. But many experts also believe it’s important to find a system that integrates with existing accounting and HR systems. In addition, they recommend keeping the employee experience in mind during the selection process — especially if employees are interacting directly with the software.
Dan Rivas is managing writer at the nonprofit Idealware, where staff members help other nonprofits make smart decisions about software. For more information, visit www.idealware.org