I Planning Guide The Comlete Buyer s Guide for Payroll Software
Table of Contents Introduction... 1 Recent Payroll Trends... 2 Payroll Automation With Emloyee Self-Service... 2 Analyzing Your Current Payroll System... 3 Key Software Caabilities Checklist... 6 Considerations When Converting to New Payroll Software... 11 The Comany Behind the Product... 12 Summary... 12 About... 13
Introduction For more than 30 years, Sage has been heling midsized businesses in all industries choose and imlement Payroll and Sage HRMS systems. Our exerience has taught us that eole need more than just roduct information to successfully select and deloy ayroll solutions. That s what this Buyer s Guide is all about. We ve distilled what we ve learned from our many successful customers and have structured it as useful information you need to know, including: Recent ayroll trends. How to analyze the effectiveness of your current ayroll software. Key software caabilities checklist. Considerations when converting to your new ayroll software. Evaluating the comany behind the roduct. Why would a software comany write a buyer s guide that doesn t romote its own roducts? Because we ve discovered that the more eole know about ayroll software, the more likely they are to choose a roduct like Payroll. An informed rofessional usually ends u becoming our customer, so we have a vested interest in sharing information with you. The Choices When making the switch to a new ayroll solution, it s imortant to carefully weigh your comany s needs and budget when selecting a vendor. Payroll solutions tyically fall into one of two tyes: Commercial software Payroll software that runs on your PC or server and allows you to run your own ayroll and manage all your ayroll rocesses in-house, including rinting checks, reorting, forms, and managing direct deosits and ayroll taxes. Commercial ayroll software tyically involves a one-time software urchase and annual suort contract for software enhancements, tax table udates, and technical advice. Outsourced service A service bureau rocesses your ayroll, rints checks, handles tax filing, and rints W-2s and other year-end forms. The bureau maintains all ayroll data and charges initial and ongoing er emloyee or er check rocessing fees for the service, with additional fees for otional services and reorts. Of these, commercial software tyically offers more flexibility and return on investment for midsized comanies. Not only is commercial software more cost-effective, it allows you to rotect wage and salary information and maintain control over ayroll rocessing to easily handle last-minute changes. With the many commercial ayroll software otions available, selecting a solution and a vendor can seem like a difficult task. That s why it s imortant to arm yourself with good information, and know the right questions to ask. 1
Recent Payroll Trends Integrated HR/Payroll Caabilities An imortant trend in ayroll solutions is integration with HR alications. For rogressive organizations, the strategic alignment of ayroll and human resource deartments is no longer a nice-to-have but rather a must-have. HR, ayroll, and benefit functions have tremendous overla, and sharing the data ensures that all systems are in sync and using the most recent and accurate data. There are many benefits to having integrated HR caabilities with your ayroll software, including: No dulicate data entry Changes made to the common HR and ayroll database need to be entered only once. This eliminates errors and the need for dulicate entry of emloyee, ay rate, benefits, and deduction information. Less aerwork With ayroll and HR data stored in the same database, you can reduce unnecessary aerwork. For examle, if HR enters a new benefit for an emloyee, the ayroll deduction amount can be automatically established as art of the benefit lan. There is no need to submit another aer document to the ayroll deartment. Integrated reorting Consolidated reorting is valuable to management but is virtually imossible without an integrated database and reorting tools. For examle, management needs a reort outlining each emloyee s total comensation ackage. This reort must contain emloyee information, benefits data from HR, and comensation data including regular, overtime, vacation, bonus, commission, and more from ayroll. You can only create this tye of consolidated reort with an integrated solution. Payroll Automation With Emloyee Self-Service Another notable trend in ayroll software is the move toward streamlining the ayroll rocess using web-based emloyee self-service (ESS) technology with integrated workflow features. Automating ayroll rocesses with ESS diserses routine tasks back to the emloyees. This strategy can lower ayroll costs without taking anything away from emloyees, making it a very attractive cost containment strategy. The key benefits of ayroll with ESS that can contribute to the comany s bottom line are: Reduced ayroll call volume Emloyees have direct access to a greater amount of their ayroll data, so they can request changes online and answer most of their own routine ayroll-oriented questions. Reduced transaction costs Partially or comletely relacing aer-based aycheck distribution with direct deosit and ESS reduces (or eliminates) the time and hysical costs associated with ayroll distribution. Direct deosit with ESS eliminates the need to rint and mail direct deosit advices. Emloyees can receive their ay stubs online and rint them out if they wish. ESS can also reduce the costs of coying, routing, and filing aer forms. For examle, emloyees can request W-4 changes online. Elimination of manual data entry Data entered by emloyees is transferred directly to the ayroll database, relieving ayroll staff members from manually entering data. This imroves roductivity and reduces errors. When searching for ayroll software, consider the integrated HR and ESS caabilities the software offers and how your comany can benefit from them now and in the future. 2
Analyzing Your Current Payroll System Before you begin the search for new ayroll software, you should analyze your current ayroll software caabilities and ayroll rocedures. This will hel you to identify more secifically the areas where current and future business needs are not being met. This in turn will hel guide your new ayroll software selection. Payroll Function Evaluation Criteria Does Your Current Payroll Software... Meets Needs Doesn t Meet Needs Business Organization Allow assignment of codes that accurately reflect your business structure (for examle multile emloyers, divisions, deartments, locations, jobs, rojects, and more? Payment Policies (Earnings) Allow earning codes to be defined that accurately reflect your ayment and reimbursement olicies for each emloyer, emloyee, and contractor in your business? Emloyee Time Collection and Processing Accurately and easily collect and rocess time information (including) regular time, overtime, illness, vacation, bonuses, and labor allocations) with timesheet entry temlates and/or interfaces with external time collection systems? Accruals and Attendance Tracking Accurately, easily, and flexibly accrue time for emloyee attendance lans (such as vacation, ersonal, and illness) and track and reort each emloyee s accrued, taken, and available balance hours for each lan? Deductions Allow you to define deductions from ay for each emloyee (such as insurance remiums, savings lan contributions, union dues, loan reayments, garnishments, tool urchases for the job, tax-deferred contributions, and charitable contributions)? Allow you to easily and flexibly manage the deductions with rules such as withholding frequencies, calculation methods, emloyer matching, and accumulating in arrears? 3
Payroll Function Evaluation Criteria Does Your Current Payroll Software... Meets Needs Doesn t Meet Needs Payroll Processing Allow you to set u user-defined ay grous and then quickly and accurately erform gross-to-net calculations that include earnings, deductions, and tax withholdings and create check information for the current ay eriod? Allow you to run a trial ayroll gross-to-net calculation rocess and reorts to ensure that all amounts balance rior to creating history records and rinting checks? Printing Checks and Direct Deosit Advices Allow you to review and rint standard and customized checks and direct deosit advices for selected ay grous? Suort MICR (magnetic ink character recognition) rinting on checks that meets bank standard secifications? Banking Suort the ACH (Automated Clearing House) Federal Reserve System standards for creating transaction files to the ACH member bank to rocess your emloyees direct deosits and your comany s tax deosit information required for deositing federal ayroll taxes electronically? Suort State Disbursement Unit (SDU) Routing Numbers for electronic funds transfer (EFT) of child suort ayments? Tax Management Closing Suort standard federal, state, and local tax tables that are udated automatically? Suort sulemental tax tables for earnings such as bonuses, commissions, royalties, and more? Suort retax deductions? Suort the Electronic Federal Tax Payment System (EFTPS) and electronic media reorting for all states? Record tax deosits/liabilities for federal, state, and local taxes as well as track due dates? Suort an interface to create and transfer files to a tax filing service (for those who wish to outsource this function)? Suort quarter-close and year-end close rocesses that automatically generate required information for reorts, tax forms, and other quarter-end and year-end information? 4
Payroll Function Evaluation Criteria Does Your Current Payroll Software... Meets Needs Doesn t Meet Needs Integration With Accounting General Ledger Allow you to ost the ay eriod s debit and credit ayroll journal entries to your comany s general ledger by way of electronic file? Reorting Provide standard reformatted reorts that allow you to use sorting otions and selection criteria to meet your secific needs? Provide a reort writer so that you can create unique resentation-quality customized reorts and data analysis? Provide ad hoc query tools that enable you to quickly and easily generate or modify requests for secific information? Security Have a flexible and easy-to-use security system to rotect your data including assword rotection, restricted user access rights to secific fields or emloyee records, and an encryted database to kee unauthorized users from accessing ayroll data using third-arty roducts? Customization Allow you to customize the system to meet your secific needs including creation of custom fields, screens, menus, data tables, and reorts? 5
Key Software Caabilities Checklist After you have evaluated your current ayroll software and rocedures, it s time to comile a list of key software caabilities your comany will need in a new ayroll solution. The following checklist includes the minimum features that should be included in a ayroll software solution. Any unique requirements your comany may have should be added to this list. Feature Descrition 3 Earnings Unlimited earnings codes Emloyer-secific earnings codes Earnings setu interview or wizard Earnings categories for work erformed, bonus, tis, and so on Base ay earnings Premium ay earnings Tax only earnings Reimbursement earnings Allocation rules Accrual rules Calculation rules FLSA overtime calculations Time Collection Automatic timesheet temlates for emloyees working a redictable schedule Manual time entry temlates Interface with time clock system Delete timesheets, if needed Flexible emloyee grouings for timesheet entry Custom format time entry screens Accruals Accrue vacation, ersonal, and illness time Track hours accrued, hours taken, and hours available Define different accrual rates based on job code Define different accrual rates based on emloyer or emloyee Susend accruals for emloyees Easily accrue attendance lans to a secified date Accrue time based on emloyee, organization level, status, or attendance lan Automatically ost absence transactions after time is accrued 6
Feature Descrition 3 Deductions Deduction setu interview or wizard Unlimited number of deductions for each emloyee User-defined maximum withholding amounts User-defined deduction start and sto dates Define deductions based on multile criteria Accumulate in arrears Flat amount deductions Earnings times ercent deductions Hours worked deductions Section 125 deductions Flexible criteria for determining emloyer match Define deductions as one-time or reoccurring Garnishments Pay Processing Create on-demand checks Retroactive aychecks Void and reissue single checks, and udate the aroriate accounts Gross-u calculator Unlimited trial ayrolls before final ayroll is run Customizable actions that take you through ste-by-ste ayroll rocess Reconcile and edit revious quarter while rocessing a ayroll for the next quarter Check and DDA Printing Print aychecks for secific ay grous or all emloyees Print searate checks for different earnings tyes Preview before rinting Print test checks Designate different check stocks for rinted checks Control alignment of checks based on rinter tye Print user-defined fields on checks and advices Suress certain fields from rinting Print on-demand checks Laser signature MICR 6
Feature Descrition 3 Direct Deosit Tax Management Automatic ACH file creation Unlimited direct deosit accounts for each emloyee Distributed to a combination of check and direct deosit Designate a deosit sequence for multile direct deosit accounts Standard federal, state, and local tax tables Automatic quarterly udates of tax tables Federal emloyer Medicare, Social Security, and unemloyment taxes Federal emloyee income and Social Security taxes State income, unemloyment, and disability taxes based on emloyer s address and emloyee s work state State child suort ayments Workers comensation taxes Sulemental tax tables for bonuses, commissions, royalties, and more Pretax deductions Tax withholding arameters including filing status, exemtions, and riorities Record tax deosits/liabilities for federal, state, and local taxes Track tax deosit/liability due dates W-2, 1099, 940, 941, 943, and CT-1 ayment tyes ACH credit transaction files in accordance with Electronic Federal Tax Payment System (EFTPS) Originating Deository Financial Institution (ODFI) routing Receiving Deository Financial Institution (RDFI) routing Electronic media reorting for all states Interface to create and transfer files to an otional tax filing service 7
Feature Descrition 3 Reorting Built-in standard ayroll reorts Reort writer for custom reorts and analyses Easy-to-use ad hoc queries Multile reort and query outut formats including rinted reort, email, sreadsheet, text file, and XML Workers comensation reorting to meet state secifications Balancing audit reorts Quarter-end audit reorts Tax code wage and liability audit reorts 1099 file electronic media reort W-2 file electronic media reort Quarterly tax and wage file reorts 941 worksheet Form 941 Quarterly reort of wages aid Preclose reort of emloyee deductions, earnings, and taxes 401(k) reorts Check/direct deosit register reorts Check reconciliation reorts Gross-to-net detail reorts Tax withholdings by tax code reorts Unemloyment/disability wages reorts Direct labor distribution reorts Leave status reorts Timesheet reorts 1099-MISC reorts 1099-R reorts Form 943 worksheet reorts Form 1096 Form W-2 Form W-3 8
Feature Descrition 3 General Ledger Information Ma defined emloyers, divisions, deartments, locations, jobs, rojects, and more to General Ledger chart of accounts General Ledger distribution reorts Define General Ledger comonents for each earnings code Automatically distribute exenses for each deduction to the correct General Ledger account Security Database encrytion Security grous with flexible security access control access to sensitive information Field-level security Record-level security Comrehensive audit trails Password-rotected user access Customization Custom check and DDA forms Custom fields Custom tables Custom screens Custom menus Custom reorts Print comany logos on checks and reorts Pay History Earnings Tax withholdings Deductions Month-, quarter-, and year-to-date Pay rate changes Summary of each gross-to-net ay record Amount of withholdings in arrears Prior quarter history Allocations Allocate emloyee earnings by organization codes, job titles, and rojects Allocate earnings based on a ercentage amount or a number of hours Reorts showing the ortion of ayroll exenses charged to each organization code, job, and roject 9
Feature Descrition 3 Job and Pay Allocate emloyee earnings by organization codes, job titles, and rojects Allocate earnings based on a ercentage amount or a number of hours Reorts showing the ortion of ayroll exenses charged to each organization code, job, and roject Emloyee Information Name Address Phone Email Birth date Social Security Number Gender Disabilities Emloyee hoto Original and last hire date Pay rate and frequency Emloyee Self-Service View ay history, earnings, ayroll deductions, tax withholdings View and rint ay stubs and direct deosit advices View and rint W-2 forms Emloyees submit W-4 to change federal withholding elections Other Cross-emloyer transfers Mass udate ay rate changes Deductions automatically link to benefits Set u ste-by-ste actions to take you through ayroll rocesses Emloyee file attachments One source rovider for a variety of check stock Online hel Intuitive navigation Emloyer, division, deartment, location, job, and roject codes Annual Suort Agreement Includes automatic quarterly udates of tax tables Includes software ugrades and enhancements Includes telehone technical suort during business hours Includes 24/7 self-service suort through website 10
Considerations When Converting to New Payroll Software Timing When lanning the conversion to a new ayroll software solution, timing is imortant. Most comanies find it easiest to make the transition at certain times during the year, such as immediately after a quarter-end, or more commonly, after year-end. Starting with a new system at the beginning of a year is articularly convenient because it allows you to simly imort historical data from the revious year or two through a link roduct and start the new year with zero balances in the system. Switching software at the beginning of a quarter is another otion. You ll start fresh with a new quarter but will still have to convert calendar year information ertaining to emloyee taxes, earnings, and deductions. Converting this information incorrectly can cause roblems it could affect W-2 reorting, earnings, and deductions, and esecially emloyer tax liability data. It s also very imortant to make sure that all quarter-end dates are correct when imlementing the new system, or quarter-end reorting could be inaccurate. To avoid these issues altogether and to hel the imlementation run as smoothly as ossible, it s usually recommended that comanies switch at a quarter-end or year-end. This isn t a necessity, however. If it makes sense for your comany to imlement a new ayroll solution at a different time, just make sure to ask your vendor if there are any secial considerations that need to be ket in mind. Resources Consider who will be erforming the installation and setu of the new ayroll system. Does the vendor offer imlementation and consulting services? Will you need to choose a reseller? Or will you be required to set the system u on your own? If any internal resources will be required during the imlementation, it s imortant to lan for this. Data transfer and conversion Consider how data from the existing system will be entered into the new system. Will the data need to be manually entered, or can it be imorted? It s esecially convenient if the vendor offers an easily customizable link to transfer data from one system to another. This often involves setting u translation tables in the link temlate that equate fields in the old system to fields in the new system. Once the data is transferred, it s necessary to verify that all information is correct. This can be done by running reorts from both systems and comaring the results. Side-by-side rocessing After the imlementation of the new system is comlete, most comanies check the accuracy of the new system by running both the old and new ayroll systems in arallel for a eriod of time. This eriod is u to the discretion of the comany it can be one ayroll run, a month, or three months. Again, accuracy of data can be determined by running the aroriate reorts. In articular, cross-referencing the numbers on ayroll history, check history, and earnings, deductions, and tax reorts is a good way to determine if everything is set u correctly in the new system. Discreancies can often be traced back to outdated tax tables in the old system, inaccurate translation tables, or slightly different ay grous. 11
The Comany Behind the Product Payroll is robably your comany s largest exense. And it is certainly the most visible business rocess to your emloyees. There is no room for error when it comes to roviding emloyees with their aychecks. When choosing a ayroll solution, it s imortant to select an established and exerienced vendor with a roven track record in offering excellent roducts and suort. Here are key questions to ask when evaluating the reutation and service of a otential ayroll software vendor: How long has the comany been in business, and how many clients use the software? What industries does the comany serve? What size businesses does the comany serve? Can you seak with other similar clients who use the software? What rofessional ayroll certifications do the suort ersonnel have? What technical suort certifications or awards does the suort organization hold? Is unlimited telehone suort offered? Is 24x7 self-service suort by website offered? Will the suort lans offered meet your secific needs? What is the standard olicy for roviding software udates, ugrades, and enhancements? What is the average resonse rate of a technical suort call? When on-site hel is needed by a customer, how is this handled? Does the comany stay consistently u to date on all tax tables and governmental reorting changes? How, when, and where is user training rovided? Summary When selecting and deloying a new ayroll software solution, there are many factors to take into consideration. Besides secific software features and functionality, it s imortant to choose a vendor known for exerience in the ayroll software industry with a reutation for reliable business solutions and world-class customer suort. has been the industry leader in mid-market ayroll and Human Resources Management System (HRMS) software for over 30 years. Our software is suorted by a nationwide network of business artners who are your local resource for imlementation, training, service, and suort. We d be hay to discuss your needs and would welcome the oortunity to be of service to you. 12
About An industry-leading, customizable HRMS solution, hels comanies otimize their HR business rocesses as well as maximize their Return On Emloyee Investment (ROEI). Develoed by HR rofessionals for HR rofessionals, delivers a tightly integrated set of comrehensive features and functionality that increases efficiency and imroves roductivity at every level in the organization. With, you can successfully meet and resond to the HR management challenges you face every day in the areas of ayroll, benefits, emloyee self-service, attendance, recruiting, training, workforce analytics, and more. By automating and streamlining your day-today HR business rocesses using, you and your staff are freed u to send more time and energy on the business asset that is most vital to your comany your emloyees. A global $2.2 billion software comany with over 30 years of exerience and 6.3 million customers, Sage has rovided HRMS solutions longer than any other comany in North America. By choosing Sage, you not only get roductivity-boosting HR and ayroll software solutions, you get the suort of an award-winning customer service team and access to many other business tools and resources that make your work life easier. To learn more, lease call us at 800-424-9392, or visit our website at: www.sagehrms.com Sage 888 Executive Center Dr. W., Suite 300 St. Petersburg, FL 33702 www.sagehrms.com 2012 Sage Software, Inc. All rights reserved. Sage, the Sage logos, and the Sage roduct and service names mentioned herein are registered trademarks or trademarks of Sage Software, Inc., or its affiliated entities. All other trademarks are the roerty of their resective owners. 01/12