How Do Payroll Processing Companies And Software Help Businesses?

Before understanding what payroll processing companies do, let us understand the concept of payroll. Payroll is the cumulative amount of compensation an organization owes its workers. Working payroll includes levying federal, state, and local taxes from the gross wages of the employee.

This is why “payroll” usually does not extend to independent contractors. Private workers are obliged to pay their tax burden in full. Employees just pay half and the employers are liable for the other half.

Payroll: Components


Availability Of Benefits

Your employer may offer employees health insurance, pension plans, and other benefits. While some of those costs may be covered by your company, the employee might also be liable for covering some of them. Until taxes are measured, all of those deductions are extracted out of income, based on whether they are post-tax or pre-tax accounts.

Withholding Of Taxes

The added deductions provided by federal or state law can apply to your employees. The employer must deduct the share of federal and state income taxes from the payroll. The organization might also need to withhold city or state payroll income taxes, depending on the region. Employees will also need to fill in a W-4 tax form to withhold extra pay.


It is the cumulative value of the dollar owed to the worker until any deductions. To arrive at the net salary of the worker, the things mentioned below will be deducted from gross salaries. Gross salaries might include commissions, incentives, tax deductions, and other provisions for compensation. Employee wages, or salary estimates, are usually called gross pay. For example, if an employee gets paid a salary of $70,000, that person will not see as much money in their bank account.


The organization will subtract the portion of Medicare and Social Security benefits from gross compensation for the employee. This is referred to as The Federal Insurance Contributions Act (FICA). The Social Security average was 6.2 percent for the employer and 6.2 percent for the worker in 2019, as per the Internal Revenue Service. For the employer, the Medicare rate was 1.45 percent and for the worker, 1.45 percent.

What are Payroll Processing Companies?

A payroll service is an external organization that focuses on the payroll process in every way. Automated Payrolls, the first such service in the United States, was established in 1949 and relies on basic techniques such as electromechanical calculators and the other element dubbed the Comptometer bookkeeping machine.

In other words, companies specializing in payroll services collaborate with their customers to ensure that workers are compensated on schedule and that the legal responsibilities of an employer are complied with. Since they just concentrate on payroll and human resource activities, they take the stress out of payroll processing.

Listed below are some of the duties and responsibilities of a payroll processing company

  • Complying with all federal and state laws
  • Tracking the working hours of the employees and marking attendance
  • Making required adjustments in the employee’s direct deposit accounts
  • responsible for the calculation of payroll taxes and making sure that all the deductions are fair.

One of the payroll company’s main duties is to make it simpler to track the attendance of workers and the time at work. Many companies do so by giving workers a choice of punch-in or clock-in options. In certain cases, workers can use protected badges or fingerprint scanners to clock in.

In other instances, workers sign in to an electronic account to log in at the start of the day and log out by the end of the shift. These devices are also configurable for tracking rests and meal times.

Why Choose A Payroll Company?

Choosing a firm providing payroll services is an ideal way to automate payroll procedures and remove the requirement for an in-house payroll division. Many corporate leaders often prefer payroll processing companies as they provide the best in enforcement and transparency with legislation.

When company executives deal with payroll professionals, they can be assured that any compensation or reporting mistakes will be easily detected and rectified. It’s a perfect way to provide secure, effective pay services for workers while mitigating the worries about liability.

Payroll Processing Software


Payroll software optimizes the payroll process for salaried, seasonal, and contingent employees. Human resource development vendors and professional payroll firms often market payroll software as a stand-alone program.

Payroll software for small businesses can be very beneficial, as payroll software is progressively a core component of automated, multipurpose program management of human resources (HCM). Payroll software greatly improves the payroll process as opposed to paper-based systems, thus reducing delays and allowing managers to tailor paychecks for individual workers more easily.

Best Payroll Software

Below mentioned are some of the most popular payroll software

  • Sage50 cloud
  • Dayforce HCM
  • Namely
  • PeopleSoft
  • Paychex Flex
  • ADP Workforce Now
  • Sage HRMS


It is without a doubt that payroll processing companies and software play a key role in the efficient running of an organization, by taking off the stress related to paying the employees, the organization can concentrate on growing the business. While that happens payroll companies and the software will aid the business in staying compliant with the law and ensures that every employee is paid what they’re owed.