Most employers should look for specific payroll software features to be standard, regardless of the provider they choose. Besides making sure employees are paid accurately and on time, there are also countless laws and regulations to keep up with. Forms can also easily get lost in the shuffle when doing this manually.
What you’ll learn
What you’ll learn
Updated: August 16, 2025
Key takeaways
- Payroll software plays a critical role in saving time, reducing payroll mistakes, and ensuring that employees get paid on time
- With numerous tax regulations and laws, having the right payroll software system will help you stay on top of the latest changes
- The most effective software includes features such as direct deposit, automated tax calculations, advanced reporting, and is able to securely integrate with other business platforms
What if you’re just opening the doors, have been running payroll manually, and are unsure what to look for? While choosing the best payroll for small business can seem overwhelming, this guide breaks down eight must-have features to look for, how they address common payroll challenges, and why you want the provider you choose to offer each one.
1. Direct deposit
In this day and age, businesses rarely pay their employees with cash or checks. Most workers use mobile or online banking and want (and expect) the convenience of their paycheck to be deposited directly into their bank account. Direct deposit is a quicker, hassle-free, and more secure payment process — and employees can count on getting paid on time without any delays or issues.
This feature should be pretty standard function when doing your research as it’s fairly popular with employees. In addition, most employers choose direct deposit because it’s a more efficient, cost-effective, and environmentally friendly way to pay employees compared to physical checks.
Why it matters
- Eliminates the need for physical checks and waiting in line to deposit a paycheck in a local bank
- Gives employees instant and convenient access to their income
- Reduces the risk of fraud
According to the National Automated Clearing House Association (NACHA), the nonprofit organization that manages the ACH Network, as of 2023, over 90% of US employees receive their pay via direct deposit.
2. Automated payroll processing
Payroll management can be time-consuming and tedious, especially if you do it manually. Often, the platforms you are considering should be able to automate payroll processing, helping to reduce the number of mistakes, and increasing accuracy. It can simplify the hard stuff like tracking paid time off, creating and distributing payslips, and onboarding new employees. Below is an example of how OnPay’s interface works to give you an idea of what to expect.
You want automation to be easy to set up and implement. Running a business takes a lot of time. Don’t waste your valuable minutes struggling with a tough payroll system. You also want to easily set multiple pay schedules and different pay rates for individual employees or 1099 contractors.
Why it matters:
- Increases accuracy and efficiency by automating time-intensive and difficult payroll tasks
- Helps avoid costly payroll mistakes
- Businesses can focus on priorities and save time
3. Tax calculation automation
Handling payroll taxes can be one of the more time-consuming tasks that SMBs must properly take care of. When it comes to paying state and federal payroll taxes errors can quickly add up.
For example, the state of California charges a 15% late fee for the total amount due for unpaid payroll taxes. Florida has a mix of penalties with different criteria, such as failing to file an Employer’s Quarterly Report online, with fees starting at $25 plus $1 per employee. The takeaway is that it can be a lot to keep up with. Calculating the math on your own can lead to avoidable mistakes that end up costing money.
The best payroll service systems should withhold all your employees’ federal, state, and local payroll taxes, unemployment insurance payments, as well as making your tax payments. It should be one less thing to track, as most programs automatically update your payroll withholdings as tax rates change. Look for a platform to use at the end of the year to help you file your quarterly federal tax return, Form 941, and Form 940.
Why it matters:
- Makes sure that taxes are filed and paid in an accurate and timely manner
- Reduces penalties due to missed deadlines or errors
- Automatically generates tax forms like W2s and 1099s
In a 2025 survey of small business owners, OnPay found that over half of respondents reported using payroll software to pay employees.
4. Compliance management
Local, state, and federal authorities set payroll compliance rules on how employees are to be paid. Your company’s payroll must follow laws including the Fair Labor Standards Act (FLSA), Federal Insurance Contributions Acts (FICA), and Federal Unemployment Tax Act (FUTA).
Common compliance regulations deal with withholding the correct amount of taxes, accurately calculating employee minimum wage by state, and filing payroll tax returns with the appropriate tax authority. The best payroll software helps businesses stay compliant with built-in rules and reminders.
Why it matters:
- Helps avoid costly legal issues, penalties, and fines
- Keeps businesses up to date with changing tax codes and regulations
- As a business expands to other states, ensures compliance with different jurisdictions
Speaking of compliance, when it comes to what a business is responsible for, over a third of small businesses count on the payroll provider they work with to keep them informed about their state’s regulations.
5. Employee self-service portals
Why should employers provide this type of feature? A self-service portal makes it easy for employees to access their personal information, view pay stubs, leave balances, and request time off. In addition, most make it simple for new hires to self-onboard without human resources present, and complete documents like Form W-4 and Form I-9. This can free up time for HR teams to stay focused on recruiting top talent instead of keeping track of email requests.
Beyond office hours, employees can also update and change their personal details, such as their address and bank information, review their withholdings, and access their tax records.
In addition, the best payroll providers have customizable self-onboarding tools for new employees. This streamlines the hiring process, saving time and resources.
Why it matters:
- Reduces HR workload by giving employees the ability to update their personal information and request time off
- Enhances employee engagement and satisfaction
- Provides payroll transparency
- Simplifies tasks like accessing tax forms
If you are looking at different payroll services, what they offer, and wondering what we offer, please see OnPay’s feature-set after reading this article to see everything our clients have at their fingertips.
6. Integration capabilities
The company you choose should be able to integrate with accounting, human resources, and time-tracking systems. Automating and syncing the flow of employee data improves the employee experience and eliminates the need for manual data entry. Employees can review their 401(k) information, health and dental insurance plans, as well as track their time and attendance.
Also, touching on compliance again, having a workers’ compensation policy is a must in 48 out of 50 states. Most companies should be able to sync employment data to automatically deduct workers’ comp premiums each time payroll is run with pay-as-you-go workers’ compensation. And it pays to make sure they offer this!
Why it matters:
- Saves time by reducing duplicate data entries
- Allows employees to access their employment, payroll, and benefits information via one system
- Ensures consistency between payroll, financial, benefits, and other employee records
7. Advanced reporting and analytics
Customizable payroll reports allow businesses to analyze data in real time to make better decisions regarding employee costs, labor expenses, and benefits usage. Additionally, the ability to track historical payroll data and compensation trends helps with forecasting future projects or hiring needs.
Why it matters:
- Provides a clear understanding of a business’s financial health
- Facilitates data-driven business decisions
- Helps forecast future salary budgets
- Offers insights to optimize workforce management and allocate resources
Access to this type of information can be another way to keep your operations moving forward. Nearly half of the participants in our small business survey shared that improving operational processes is a top priority before the end of the year, making advanced analytics another valuable feature to look for.
8. Account security
With a rising stream of online fraudsters trying to hack into small business networks, protecting employee data can feel like a full-time job. Fortunately, a top priority among payroll providers is safeguarding and encrypting sensitive information like bank details and Social Security numbers, and keeping software up to date. For example, OnPay offers multi-factor authentication to protect employees and employers from cyber crimes.
Why it matters:
- Prevents data breaches and unauthorized access
- Ensures compliance with data protection regulations like GDPR
- Builds trust with employees by keeping their information secure
Choose payroll software features that save you time
At the end of the day, the right payroll tool simplifies the repetitive tasks you should automate. As you evaluate different options, you’ll find each comes with its own pricing, features, and support levels. OnPay is trusted by thousands of business owners and consistently earns top ratings — whether you’re new to payroll providers or looking to switch from your current one. Try OnPay’s tools free for 30 days — our team is available to answer any questions.
Take a tour to see how easy payroll can be.
Jon Davis is the Sr. Content Marketing Manager at OnPay. He has over 15 years of experience writing for small and growing businesses. Jon lives and works in Atlanta.