If you’re looking into an online payroll service, you probably know the basics – a payroll service is an outside company that handles all things related to payroll, from paying employees to filing taxes. But it’s worth taking a closer look at exactly how some of their features work in order to help you pick the best service for your business.
How Do Online Payroll Services Work?
Features vary between different services, but in general a good online payroll service will handle direct deposits for employees, pay contractors, and calculate both employee gross pay for a pay cycle and calculate employees’ paychecks after deducting payroll taxes, withholdings, and other deductions.
Integrations: If you also have bookkeeping software, you’ll want to make sure that your online payroll provider will be able to integrate with it. Some will do this more seamlessly than others; Intuit Payroll obviously runs within Quickbooks, since they are part of the same company. QuickBooks Online offers special introductory pricing (mentioned below) that reduces the first year costs by 50% for people who sign up for their bundled bookkeeping and payroll services. Others, like ZenPayroll, can integrate with Quickbooks and other bookkeeping software like Freshbooks, but may not do it as tightly as a larger provider like Intuit.
Taxes: Depending on the size of the plan you choose, an online payroll service can range from calculating tax liabilities to handling all payroll taxes for you. Most of the top services will create year-end tax forms for employees and government agencies, including W-2s, W-3s, Form 940, and 1099s. Some will automatically fill in federal and state payroll tax forms, leaving it to you to simply e-file.
It’s worth noting, however, that in the eyes of the IRS employers are ultimately responsible for ensuring the payment of federal taxes. The IRS recommends that payroll services use EFTPS (Electronic Federal Tax Payment System), so that employers can confirm payments are being made on their behalf.
Retirement services: Some online payroll services let businesses set up payroll items for retirement benefits, although you’ll typically need to purchase a more advanced service to find this feature. For those that do offer a way to manage retirement benefits, using the feature can be as easy as selecting a new payroll item, and adding the company contribution to the plan, whether it’s an IRA or 401(k).
Some online payroll services will also offer Affordable Care Act support, although typically it is through a separate product sold by the same company. APS, for instance, sells an ACA reporting solution product in addition to its online payroll service, and integrates some ACA information into the payroll service. Others have made the decision not to support ACA. Intuit says “much of the information needed to complete these new ACA forms is considered HR/Benefit in nature, which unfortunately, no QuickBooks product and/or payroll offering currently house.”
Services to Consider
The top names in online payroll services consistently include Intuit, Gusto, and OnPay.
Intuit is very scalable, and is probably the most feature-loaded. That means it comes with a bigger price tag for some of its larger plans. The Intuit Online Payroll Basic plan starts at $20 per month, plus $2.00 per month, per employee, and goes up to $79 per month for full-service payroll. For QuickBooks with payroll, pricing starts at $32.97 per month, plus $1.50 per employee, per month, and goes up to $69.47 per month, plus $2.00 per employee, per month for the most feature-loaded version. The pricier versions include setup and running of payroll and filing of payroll taxes; calculation of paychecks and payroll taxes; free direct deposit and year-end W-2s; free, live, U.S.-based support, and the ability to run it from mobile devices.
OnPay consistently gets great reviews as a good online payroll service for small businesses. The monthly base fee is $39.95 per month, which includes up to 10 employees. Features include unlimited payroll runs, handling of all payroll tax responsibilities, integration with accounting software, and management of paid time off.
Gusto, which formerly called ZenPayroll, also gets top marks for small businesses and sole proprietors. It has a $29 base price, plus $6 per employee per month, making it one of the cheapest online payroll services out there. That price include all of the features the service offers, including direct deposit, unlimited payroll runs, year-end W-2s and 1099s, new hire reporting, and compliance management.