What You Need to Know About Online Payroll: A Simple Guide for Small Businesses

As a small business owner, you’re probably focused on the day-to-day operations of your company. But you also need to keep an eye on the long-term future of your business, and that includes adopting best practices from the moment you hire your first employee. Keeping track of employee payroll can be tricky, especially as a business grows.

Even if you have an accountant or bookkeeper to help with taxes, you should still implement online payroll for several reasons. First, it will save time and money in the long run. Second, employees will love it because it’s convenient and easy to use. Third, it reduces your risk of getting audited by simplifying record keeping. Read on to learn more about why online payroll is beneficial and how it works.

What Is Online Payroll?

In its most basic form, online payroll is a software solution for managing employee payroll and human resources. It’s a cloud-based system that allows you to manage payroll and employee data, process payments, and make changes to benefits and other aspects of employment. It’s designed to be user-friendly so anyone in your company can use it, even if they have no experience in payroll.

Online payroll allows employees to submit their timesheets, view their paystubs, and make suggestions for improvement through an app or website. It also gives you and your employees access to information that’s important to your daily work lives. Online payroll allows you to view current and past payroll information, including tax deductions, pay rates, and other details.

Why Is Online Payroll Beneficial for Small Businesses?

Online payroll is beneficial for many reasons. When you run the show, you’re responsible for everything from the efficiency of back-office operations to the success of the sales force, but that doesn’t mean you have to do it all on your own.

Rather, there are times when strategic decision-making and smart delegation can improve your operations and help you get more done. Managing your payroll is an example of this. You can handle the payroll process, delegate the task to a trusted employee, or enlist the help of your bookkeeper or accountant.

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No matter who is in charge of payroll operations, there are many benefits to using online payroll software to do so. Here are some of the biggest benefits you can enjoy when you switch to online payroll software for your small business.

Enhanced  Accuracy

Nothing is worse than a payroll system error, and using online software reduces the likelihood of those costly errors. Making a mistake that lets your employees down could destroy your company’s morale and even lead to legal problems for you and your company.

Making a mistake that pays your workers too much could leave your business without working capital, and the logistics of getting that money back could be a nightmare. With online payroll software, you can greatly reduce the risk of human error and ensure that your employees receive exactly what they’ve earned.

Cost Savings 

The cost savings from switching to online payroll software will increase as your business grows, making the investment even smarter as your business continues to add new workers. In the end, you can enjoy better results, lower costs, and a more strategic approach to running your business.

Time Savings 

Payroll isn’t exactly a fun job, and chances are your designated staff member isn’t anxious about the monthly payroll reconciliation. Using online payroll software can make your job easier and save you a tremendous amount of time.

That time savings means the designated payroll processor will have more time for other tasks, increasing the efficiency of your operations and lowering your overall costs in the process. Switching to a software-based payroll administration system can also reduce the tediousness of the task, giving you one more great benefit.

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Easily Accessible 

When you use online payroll software, you can safely store your data in the cloud. That cloud-based system gives you enhanced security, but it also gives you and your staff members secure access from anywhere.

Your designated payroll processor can check the accuracy of payroll reports, generate tax forms, and process wages and additional payments from anywhere there’s an internet connection, making it easy for everyone to work.

Automation Enhanced

Automate processes where you can save a lot of money and payroll to your business is one of the best examples. Processes that would take tens of hours and require a dedicated staff of workers can be completed by a single employee in a matter of hours.

Once the online payroll system is set up and all employee data is imported, your designated staff member can simply enter the number of hours worked, check the results and authorize payments. Your employees will be happy when their salary payments come in, your designated payroll person will be happy the job is done, and you’ll be happy everything is running smoothly.

Increased Security of Data

The security of your data is critical, and payroll data is especially sensitive. Your payroll file contains personal data like dates of birth, mailing addresses and more, it’s up to you to protect that information.

The best online payroll software uses state-of-the-art security to protect that sensitive data from falling into the wrong hands. That alone is a great reason to make the switch.


Increased Employee  Satisfaction

If your employees are not happy, you will not be happy. If you neglect morale in your office or factory, you could find your best employees voting with their feet and heading out the door.

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Using online payroll software increases the efficiency of your operations and reduces the likelihood of making mistakes that could incur the wrath of frontline staff. That gives you one less thing to worry about and helps you keep your best workers where they are.


How Does Online Payroll Work?

Online payroll is designed to be easy to set up and use. You’ll begin by choosing a payroll provider. Some of them are free, but many charge a fee based on your company’s size and employee population. Your payroll provider will help you set up your account, choose a plan that best suits your needs, and walk you through the setup process. You’ll create an employee manual and set up your pay period. Then, you’ll add employees and set up their rates of pay, deductions, and other information.

Drawbacks of Online Payroll

Like every business practice, online payroll has some downsides. It’s important to understand how the system works so you can avoid any pitfalls.

First, you need internet access to use online payroll, so make sure you have reliable internet access at your office and on the go. Second, your employees will need internet access as well, so make sure they have a computer or mobile device. Third, online payroll may increase your risk of getting audited by the IRS. That’s because it simplifies record keeping, which puts more of an emphasis on the numbers. Fourth, your employees may not like the change if they were previously used to a different method of payroll.


Online payroll is the easiest and most convenient way for small businesses to manage employee payroll. It simplifies record keeping and makes it easy for employers to manage pay rates and deductions. Best of all, online payroll is easy for employees to use, so they’ll love it.

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