What are the factors to consider when getting payroll software?

We’ve answered the question what is payroll management software earlier in the article, let’s now look at how does it work. It depends on many factors. Payroll management software comes in various packages. Some are bundled with HRM, ERP or accounting system, while others are independent solution. Before committing to a plan, consider the following key factors to ensure you’re getting the best value off your budget.

Cloud vs. on-premise.

As with most business processes, payroll management can be cloud or on-premise. The list of pros and cons is long for both versions. Cloud has low capital outlay, regular updates, easy setup, near-zero maintenance, readily available support, multi-device accessibility, flexible features and price points. But it commits you to a perpetual monthly cost and sensitive data are stored in servers you don’t have control.

On the other hand, on-premise requires: huge investment for licensing and servers; in-house technical talent to install and maintain the system; and downtime for upgrades. But data stays with you and there’s no recurring costs. We have an article that details cloud vs. on-premise comparison, which applies to your other business processes, too.

Total cost of ownership.

License fees or monthly subscription isn’t the only cost that comes with payroll management software. Read the fine print and check for hidden fees. Common costs that can quickly bloat the budget include: core features that are separately charged; setup fee; system upgrade; per-user fee; per-paycheck fee; training fee; and support fee. Also mind lock-in terms, which may strap you down with features you’re paying for but don’t need.

Regulatory compliance.

Make sure the payroll system support tax laws, social security requirements and applicable local regulations. These include the ability to set the right wage deductions, adjustments and generating required reports for different government agencies. Likewise, a good payroll solution automatically upgrades the system for tax changes, so your processing is consistently compliant.

Key features.

Focus on key payroll functions that meet your unique requirements. For example, how do you pay employees? If via direct deposit make sure the system allows bank synchronization, if through paychecks look for software that prints checks. Other key features include: taxes (does the system support local laws?), pay period (daily,weekly, monthly?), and supplemental payment (does it support bonuses and commissions? contractual service?).


Your payroll management system should stand the test of time and match your growth pace. Look ahead in five years and anticipate what features you’ll be needing. For fast-growing companies, these can mean more users, more employees, more branches, possibly offshore units and other additional operational elements that impact on payroll. In general, cloud payroll systems are more flexible at scaling up features, alongside the corresponding price tiers.


If the payroll solution isn’t part of a larger system like ERP, HR or accounting, it must at least integrate with them. As your business expands payroll processes get more complex and will need to integrate with other applications, such as, sales ledger, recruitment, timesheets and reporting tools . Aside from system integration, you’ll need to think of compatibility with business and productivity apps you’re using. File export-import should work with standard formats like PDF, JPEG, DOC, CSV and TXT. Integration with cloud storage is also a big plus for backing up records.