The Advantages of Traditional Payroll Systems

  1. Small businesses have a number of options available when deciding on the best method for issuing payroll checks. The small business owner with only a couple of employees may think that manually preparing payroll is the best route to save money, especially because the cost of using a payroll service may be out of the owner’s price range; however, small business owners can benefit from using a moderately priced traditional payroll system to prepare business payroll.

Cost

  1. A traditional payroll system for a small business is usually considerably cheaper than contracting payroll preparation out to a payroll service, and can often be cheaper than manual preparation of payroll due to savings achieved through a reduction of payroll errors, and the knowledge level and time required for an employee to manually prepare payroll. With a basic amount of understanding, clerical staff can learn to use a payroll system and the business saves the cost of hiring a payroll professional. Because a payroll system calculates withholding taxes for you, it eliminates mistakes made in tax filings, eliminating penalties and interest often charged for filing errors.

Automatic Withholding Calculations

  1. You add new employees to a traditional payroll system by adding information about the employee, such as name, address and all information from the Form W-4, in which the employee designates his filing type and number of exemptions. The payroll system comes preloaded with the Internal Revenue Service payroll deduction tables that supply the deduction rates for Social Security, Medicare/Medicaid, federal tax withholdings and federal unemployment tax. Using a combination of the employee information and the provided tax tables, the system will automatically calculate all payroll deductions and apply them to the gross pay before issuing a check for payroll. Spending hours manually calculating payroll withholdings, and risking a calculation error are a thing of the past with a traditional payroll system.

Tax Compliance

  1. Payroll system software developers will provide annual updates to the tax tables as the IRS changes withholding amounts. The updates are easily installed into the payroll software and ready for use at the appropriate date, completely eliminating the need to keep up with changes in tax rate tables and deduction rates and limits. By providing you with regular updates, payroll system developers help you maintain tax compliance by assuring your payroll deductions are always calculated using the required rates.

    Payroll systems also calculate the amount of employer tax due to the IRS and to the state, if you pay state unemployment in addition to federal unemployment. You can generate reports that provide you with the exact information needed to fill out federal and state forms for payroll tax remittance, and in some cases, the payroll system may generate the forms for you.

Time Off Tracking

  1. A payroll system can track vacation, sick and holiday pay, as well as accrue vacation and sick time based on the accrual settings you provide. This eliminates manual tracking of paid time off and mistakes that can be made with manual tracking.