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How To Build A Custom Payroll Software: A Complete Guide + Case Study

    Choosing a new payroll provider or implementing and managing a payroll system is important if your company has expanded to the point where it needs one. With the appropriate payroll software, you can reduce the administrative burden on your payroll staff and increase employee retention and productivity.

    If your firm has more than 250 employees, you’ll benefit from using a customized payroll system. Accessing technology to manage payroll assessment, cutting expenses and risks, and freeing up time and resources are only some of the key benefits of using this service.

    We’ll go over what to look for in a payroll platform that will save money, minimize administrative burdens and increase employee and manage payroll. Payroll software features, pricing, and ease-of-use will be examined, as will the pros and cons of outsourcing.

    Are you looking for payroll software that’s easy to use? Let’s talk.

    How To Create A Payroll Software

    When it comes to managing payroll, it’s all about what your company requires. Is your payroll service provider able to meet the needs of a business of your size? And does the program have the features your employees need to do their duties effectively? As you complete your due diligence on payroll software, look for the following features.

    Gather Information For Payroll

    The following are only a few examples of the data:

    • Name and position of the employee.
    • Identification numbers such as social security cards.
    • Contributions and deductions as of the current year.
    • Status of tax returns

    This is how you should configure your payroll for the following purposes;

    • Create a unique employee identification number (EIN)
    • Obtain a state tax identification number for each of your employees’ residences.
    • Organize the payroll procedures (monthly, weekly).
    • Use a time clock to keep track of the number of hours employees work.
    • You should open a business bank account to reconcile your company’s payroll.
    • Collect your employees’ bank information.

    Calculate Gross And Net Pay

    Once you have gathered all the necessary data, you can begin computing the salaries. Compile your timesheets, including overtime, and verify that your payroll software is already integrated with time tracking software.

    Subtract the tax savings and health care benefits from the gross income, and you’ll arrive at the net pay. You will arrive at net pay by subtracting payroll taxes from the gross salary.

    Payroll deductions consist of the following items:

    • Social Security taxes, health insurance premiums, and other pre-tax deductions.
    • The federal, state and municipal income taxes are withheld from your paycheck.
    • Contributions to insurance plans, 401(k)s, and wage garnishments are examples of post-tax deductions.

    Add Employer Payroll Taxes

    Employee remuneration involves a variety of taxes that employers must pay, including the federal unemployment tax, the state unemployment tax, and other regional levies.

    Ensure your manage payroll software is running properly before sending the paycheck to your payroll system.

    Even though this may appear to be an unnecessary step, software problems sometimes arise.

    Set Up A System For Entering Payroll

    The best payroll management system connects with accounting software to facilitate payroll journal entries. This category falls under wages, taxes, and other deductions from employee paychecks. Paychecks should always include paystubs, regardless of the method of payment. Employees will be able to double-check their work this way.

    Record The Terms Of Payment

    Ensure that you pay state taxes for employees who work in another state after you’ve made payments by checking in every quarter for tax payments. State tax IDs can be obtained from the relevant state tax website. In most cases, the first payment must be made manually to allow automatic payment via software.

    Create The Payroll Documentation

    After all the payroll is done, there is one final step. The previous year’s earnings reports (W2, W1, W4, and 1099 forms) must be sent to employees and the Internal Revenue Service (IRS) each year (IRS).

    This may not make much sense at first. Payroll software, however, provides state tax filing regulations and forms to facilitate your business’s managing payroll deductions.

    It’s a good idea to check with an auditor to ensure your tax records are accurate.

    Buying And Installing Payroll Software

    Sometimes, purchasing payroll software is preferable to using a third-party provider. In the first place, payroll can be left in the capable hands of internal personnel who are well-versed in the operations of your business. Payroll software might also be less expensive than employing a third-party agency to handle your accounting needs.

    Custom payroll software has several advantages, and the following are some of those advantages:


    Most projects are constrained by their budget, and payroll software is no exception. Check the manufacturer’s website for free demos if you locate a payroll software suite that suits your requirements. The last consideration is whether or not the software you’re considering can be customized to meet your company’s specific requirements. You can make an informed purchase decision by reading user reviews and other information.

    Payment Options

    The core of your payroll software comprises several components, which differ depending on how your payment system operates. How frequently do you pay your workers? Do you pay your employees via direct deposit, or do you use a different payment method? What if you could automate deducting taxes and calculating sales commissions for you? Keep these questions in mind as you seek the best payroll management system.


    It’s not always as straightforward as pushing the “Install” button to get payroll software installed in your firm. Be on the lookout for technological issues and routinely back up your data. A problem with your payroll software’s server can make or break your entire payroll operation.


    Your employees’ bank accounts, routing numbers, and information from your books are linked together via payroll software. A payroll system with strong anti-hacking and anti-virus capabilities is a wise investment. There are several factors you should keep in mind when looking for payroll software.

    Customer Service

    To be safe, go with a software provider that prides itself on providing top-notch customer service. You may get the most accurate information about a product’s technical support by reading customer reviews. If it works, such support could save you and your IT staff a lot of time and frustration. If it doesn’t, it’s generally advisable to look for a new one.

    Final Thoughts

    We hope this step-by-step guide will assist you in setting up an efficient payroll system for your small business. Please share your story with us.

    It’s easy to see the consequences of working with a subpar payroll service provider. Paying employees late or incorrectly has a negative impact on morale and productivity for the entire company. Administrative concerns can cause reputational damage to businesses and even legal problems in the worst-case scenario. Payroll procedures can be made more efficient with a competent payroll system, giving employers more assurance that their employees will be paid on time.

    It’s worth the money to get a competent payroll system. Streamlining your accounting and managing payroll processes frees time for your accounting and payroll team to focus on more important tasks. One of the most critical aspects of your company’s long-term strategy is keeping both feet on the ground at all times while maintaining a healthy balance between both.

    The reputation of your business and the happiness of your employees are worth maintaining in an era of increasing expectations for the employee experience. 

    Are you looking for a simple, all-in-one, complete payroll solution? Find out more about the DotNet Report.


    How long does it take to develop a payroll system?

    A completely functional MVP for custom payroll software can take three to six months to construct.

    Is learning to do payroll hard?

    It can be a daunting task to learn how to do your payroll. Everything can go wrong, and if you make a mistake, it will impact not just your well-being but also the well-being of your staff, and you may even face an IRS audit.

    What is the cheapest custom payroll software to use?

    Custom payroll software for small businesses can’t get any better than DotNet Report Builder when it comes to low-cost customization. Custom pricing and options make it ideal for enterprises of any size.

    Let us know if there are any questions or comments.

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