What are payroll management services?

Payroll services, taxes, and compliance can be some of the most frustrating tasks for small businesses. In recent years, payroll software has made strides to improve the process, but it is still no small task. 

Unfortunately, payroll systems cannot automatically know when an employee moves states, gets married or gets a raise. The data that backs a payroll system falls under the umbrella of payroll management.  

Payroll Management

  • What is payroll management?

Payroll management is the administrative work of managing a company’s employees and their respective salaries, benefits, taxes, and payment processing in accordance with the law. Not only is it the processing of payroll for hourly and salaried employees, but it also includes keeping up with changes among a company’s staff, such as moves or marriages. Payroll management also includes managing the software a company uses to process payroll.

  • What are payroll management services?

Payroll management services are service offerings by third-party companies or freelance workers to aid in the administration of payroll. Typically, these companies have no part in the decision making process of raises, hiring salaries, benefits, etc. However, they do help manage any changes.

These services can often take a lot of time and effort off of an owner or CFO’s shoulders in a small business. Another advantage is that these fractional payroll companies cost less than hiring a payroll manager. Most small businesses don’t yet need a full-time payroll manager. Payroll management services can charge at a rate tailored to the amount of work your business needs, saving you money.

  • What is a payroll management system?

A payroll management system is a software program used to store data and assist with all things payroll. Often, these companies sell services beyond the administration of payroll. Payroll software ranges from all-in-one HR platforms to simple documentation platforms. These systems are necessary to keep up with the modern business landscape. Businesses must move beyond paper methods of taxes and cutting checks. These methods add too many hours of work, leave room for error, and make it difficult to store data. 


  • What is the role of payroll?

The role of payroll is to administer the pay agreements between employees and employers. In other words, it keeps employees happy and employers following the law. Payroll is also important for tax purposes. Oftentimes, payroll systems and managers can help employees fill out income tax forms appropriately. 

  • What is the most important part of payroll?

The most important part of payroll is compliance. Payroll must be administered according to the law, so that the employer is running a legal business and does not get audited by the IRS.

What are the steps of a payroll process? 

Here are the five steps of establishing a good payroll process. 

  1. Collect employee files and data in a software system. The best practice for establishing a good payroll process is to have multiple locations for documentation. It’s important to have employee records on file for pay and salary information. This is especially important if your business has employees on different payroll types or in different states. 
  2. Establish a consistent pay frequency. The best fitting pay frequency depends on the type of business. Companies with hourly workers often process payroll weekly. However, the most common pay frequency is bi-weekly followed by semi-monthly. Monthly is another option. However, this can place budgeting and financial stress on employees.
  3. Establish an administrative process with a professional. It’s easy to mess up payroll. That’s why it’s best to have a professional manage processing your payroll. 
  4. Survey Your employees. Employees are an important part of the payroll process. If receiving their money, understanding their pay stub, or changing their information is difficult, then the process can be improved. This is why a short survey is an effective way to know if your process suffices. It is good practice to monitor changes and problems with your payroll in general, and a great way to do this is through your own employees’ experiences. 
  5. Plan for adjusting data. This is not a set it and forget it process. Companies should decide how changes will be communicated and documented. Standards should be set for commissions, final pay, raises, etc. This should be budgeted into a payroll manager’s time. 

Need payroll management services for your business?

The Direct Assist Accountants team of professionals specializes in helping small businesses manage their payrolls. Contact us today to get started.