How to choose the best payroll software for your business: questions to ask vendors

In this guide, a vendor is a company that sells payroll software.

Why a sales demo is not enough

Every payroll product can pay people correctly in a sales demo, because the demo uses simple, made-up data. The real differences show up months later, for example:

• when the first payroll tax return is due,
• when an employee moves to another region,
• when a contractor needs a year-end tax form,
• when a letter from the tax office arrives, months after a mistake was made.

A sales demo rarely shows any of these. So ask about them in writing, and ask every vendor exactly the same questions. Then you can compare their answers directly.

Before you contact any vendor

Write down your answers to these four points. They decide which questions in the checklist matter most to you.

• Where your people work and live. Tax, social contributions and the rules for reporting new employees are different in each country, and often in each state or region within a country. An employee who lives in one place and works in another can bring extra rules.
• Who you pay, and how. Salaried staff, hourly staff who can earn overtime, staff who receive tips, and contractors. Each group adds its own rules.
• What the payroll software must connect to. For example your accounting software, a time clock or timesheet tool, and any benefits provider.
• What you will do yourself. Some payroll services file every tax return and pay every tax for you. Others only calculate the amounts and leave the filing and paying to you.

The checklist

The questions are in three groups. Must have means most small businesses cannot do without it. Nice to have means it saves real time or trouble. Optional means it only matters for some businesses. When you open the checklist in NeutralPick, you can move any question to a different group to match your answers above.

• Must have
• Files and pays payroll taxes for youDo you file every payroll tax return and make the payments to the tax authorities for us, or do you only calculate the amounts?"Calculates taxes" and "files and pays taxes" are different services. If the software only calculates, you are responsible for filing and paying on time, and for any late penalties.
• Follows the rules everywhere your people workDoes it calculate tax and social contributions using the rules of each country, state or region where we pay people?Paying people in more than one place is where cheaper payroll software most often gets the numbers wrong.
• Pays by bank transfer on a set scheduleDoes it pay every employee by bank transfer on a repeating schedule, and how many days before payday must we run payroll?Some services need four days' notice before payday, others need one. That decides how late you can still correct someone's hours.
• Year-end tax forms, filed for youOften required by lawDoes it prepare and file the year-end tax forms our country requires for employees and for contractors, at no extra cost?Most countries require these forms every year. Some vendors charge for them separately, so ask.
• Pays for its own tax mistakesIf a tax is wrong because of a mistake by your software or your staff, do you pay the penalty and the interest? Please send us the written terms.Get this in writing. Many guarantees do not cover mistakes that come from information you entered.
• Nice to have
• Overtime and paid leave under local rulesDoes it calculate overtime and paid leave automatically, using the rules of the place where each employee works?The rules differ by country and sometimes by region. In some places overtime is counted per day, not only per week.
• Imports hours from your time clockCan it import worked hours from our time-tracking tool or a timesheet file, so nobody has to type them in again?Typing hours in by hand every pay period is where most payroll errors start.
• Sends payroll to your accounting softwareAfter each payroll run, does it send the journal entries to our accounting software automatically, using our own accounts?Otherwise someone has to enter every payroll run into the accounts a second time.
• Employees can see their own payslips and tax formsCan each employee log in to see and download their own payslips and year-end tax forms, including after they have left the business?Former employees ask for old payslips more often than you might expect, for example when they apply for a loan.
• New-employee forms and reportingOften required by lawCan new employees fill in their tax details online, and do you report or register new employees with the authorities for us where that is required?Many countries and states require new employees to be reported within a set number of days.
• Employees who live in one place and work in anotherDoes it apply the right rules when an employee lives in one country, state or region and works in another?If none of your employees do this, skip this question. If any do, it matters a lot.
• Optional
• Benefits deductionsCan it deduct health insurance and pension or retirement contributions from pay, and send the money to our providers?Useful if you offer these benefits now, or plan to.
• Bringing in this year's payroll historyIf we switch to you partway through the tax year, will you load our payroll history for that year, so the year-end forms are correct?If you switch at the start of a tax year, you don't need this. If you switch partway through, you do.

Answers to look at carefully

Vendors often answer the points below in vague terms. When you get a vague answer, ask the follow-up question shown here. A vague answer often means the honest answer is "no" or "only partly".

• "We cover every country" or "We cover every state." Ask: do you actually file and pay the taxes in each place we need, including local taxes, or do you only calculate them?
• "Accuracy guarantee." Ask: what does the guarantee not cover, and does it pay the interest as well as the penalty?
• A price per month. Ask for the full yearly price for your number of employees. It should include fees per employee and per contractor, year-end forms, extra countries or regions, and extra payroll runs outside your normal schedule.
• Leaving later. Ask: what can we export when we leave, and will you still file the returns for the tax period in which we leave?

What to do with the answers

1. Put all the vendors' answers side by side.
2. Look at the Must have questions first. If a vendor cannot do something you marked as a must-have, remove that vendor.
3. If a vendor answered "Partial" to a must-have, ask them exactly what is missing.
4. Book a product demo only with the vendors that answered well.
5. In each demo, ask them to show you what they claimed in writing: an employee in a second location, a week with overtime, and a year-end tax form.

Why use NeutralPick to compare payroll software

• Every vendor answers the same questions. Each vendor gets its own private link to your checklist and answers in writing, so you can compare their answers question by question.
• All the answers in one table. You see every vendor's answer to every question side by side, instead of searching through emails and call notes.
• No vendor can pay to influence it. There are no adverts, no paid placements and no "featured" vendors. No vendor can pay to be shown to you or placed higher.
• Free, with no account. You don't need to sign up or pay anything.

Start with this checklist See an example comparison