The Best Payroll for Startups in 2024

So the first thing is a simple, intuitive interface. You will need to know actually how to work this thing and probably some of your team members need to know how to work it. Don’t pick something super complicated! The online interface needs to be well designed, and the online help content needs to be robust. Of course you want a solution with good online support - but you don’t actually want to have to call them all that often.

The next thing is you need to be able to run payroll on autopilot. There is nothing worse for employee morale than when payroll is missed. You don’t want your team asking questions like, “Does the company have enough money?” “Why didn’t I get paid last Friday?” So you want autopilot. You need autopilot. It also saves you a lot of time and money with your accountants. There’s no real reason to be paying your bookkeepers to run payroll. You should be using a system that runs it automatically.

Next, you need the system to handle tax information, specifically like state payroll tax information, really nicely. Many companies now have remote workers, which means employees in many other states. This dramatically complicates your employment taxes, so getting information into the payroll system is super important. So it’s important that the system can handle that information and also make the employment tax payments to those states correctly 100% of the time. Of course, there are other startup tax deadlines to keep track of as a founder, not just payroll tax.

We already mentioned it, but great customer service matters. This really starts to become important when your startup is getting acquired by a big public company, because during diligence you may need a bunch of state tax filings - you don’t want paperwork issues like this to delay your exit. Or you just need something that comes up and if you can’t get on the phone with your provider, then you could be spinning your wheels and actually delay a fundraising, as VC due diligence is getting much more sophisticated.

If you are using outsourced accounting or bookkeeping, like we provide, you will want a good payroll system that provides premium support to your accounting partner. You do not want your accountant sitting there on hold charging for that time. So choose a system that plays well with accounting companies, as yours is likely to have to do some of this work and fix issues for you.

As we mentioned before, the best payroll providers make it easy for you to claim the R&D tax credits. Kruze has saved our clients over forty million dollars in payroll taxes using these tax credits. But only good payroll systems can automatically intake these R&D tax credit forms, and automatically send the right information out to the IRS. And the best ones can get you a real-time credit, so you get the savings quickly. The providers that can’t get their act together means our startups don’t get their refund for a really long time. That’s money that could be in your bank account and could be paying for another engineer or sales person.

COVID has dramatically changed the employment landscape - more and more of our companies have employees in multiple states. Not only is the ability to onboard a new employee in a remote location a must, but the easy election of benefits, access to tax forms, etc is imperative for your remote employees - they can’t swing by your desk to ask for important documents anymore! Plus, remote hiring means more compliance issues for your business, as you’ll have to make sure you are getting local employment taxes right and filings right based on the state that each employee lives in.

The federal government required quarterly reports on your employees’ wages, taxes withheld, etc, called the Form 941. And most local jurisdictions have similar requirements. (We’ve listed out the deadlines for these tax forms and others on our C-Corp Tax Deadline Calendar, plus local tax calendars as well.) Choose a provider who helps automate the creation of these forms. And remember to not backdate payroll, as you’ll can create some serious issues with these filings! 

If you are growing your team quickly, you will need strong HR reporting. You need to know who’s in your organization. You need to be able to see PTO balances, sick leave balances. You need to be able to see who reports to who. You need to be able to sort teammates based on their titles. All that kind of reporting becomes really important as you grow. If your payroll provider invests money in their HR reporting and dashboarding, it can make your life so much easier, make your accountant’s life so much easier and save everybody money.

The final thing that you should be looking for is a really nice integration into QuickBooks or the other major accounting packages. When those payroll journal entries come in automatically, it actually saves your bookkeeper a lot of time. And your tax accountant will love it when they’re broken out by employee. That makes doing the R&D tax credit a lot easier. So make sure they have a good, clean integration with QuickBooks.

That’s how you find the best payroll provider for your early-stage company.

First off, you’ll want to enter all the relevant company information into your new system, including EIN, company bank account details and other business state ID info. Each payroll system we’ve listed offers easy integration into your bank account to set up direct deposits.

Next you’ll need to choose the pay cycle you’re going to be paying your staff (the most common is paying on the 15th and last day of the month, or every other week). You can also set up any necessary bonuses, commissions or tips, plus hourly employees may need different pay schedules than full time.

NOTE: When you set up your system, you’ll have the option to two-day payroll versus four-day payroll. This refers to the elapsed time in between when the payroll is processed to when the money enters employee bank accounts. Four-day allows your payroll provider two days to debit the cash from your bank account, so they don’t begin to pay out until they’ve received the money from you. When you request two-day payroll, your payroll provider is essentially floating your company for a couple days, since the money hasn’t arrived yet. Gusto’s standard is four-day, but you can apply for 2 day if your payroll total is under a certain dollar amount and the Gusto Risk Assurance Team signs off (you’ll be asked to upload an image of your bank account balance for proof that your startup is good for the bigger dollar amount).

You’ll need to gather a list of info for all of your employees including: full name, job title, start date, current address, social security number, date of birth and salary details.

Send each employee a login so they can add in their tax and bank information for direct deposit and tax withholding. This is also a good opportunity to verify employee I9s – documents that ensure that your employees can work legally in the US.

Once you have your employees set up, you’ll want to start getting registered in those states (unless you’re in a PEO like Justworks, in which case you won’t need to register), For each state in which you have employees, you’ll need to register for payroll taxes and unemployment taxes. And for each state in which you do business, you’ll need to register as well. Your payroll can be blocked if you don’t have the state’s payroll and unemployment numbers. This step is a lot of work, which is why we handle it for our clients.

Set up your different office locations to make sure employees are taxed through the right offices and right states.

Verify that your employees added in all the correct information and are eligible to work in the US.

Don’t forget to add holidays, vacation policies and accrual systems to your payroll system, so employees can put in PTO requests directly through the software.