Best Free Payroll Software for Small Businesses - 2023

Using payroll software enables businesses to:

• Save time: The manual management of payroll is a huge administrative burden on small companies, not to mention all the mistakes and errors that are inevitable with manual labor. Payroll software automatically calculates and processes your recurring employee payments with little to no errors, allowing business owners to ditch administrative work and focus on bottom-line enhancing strategies. 
• ‍Save money: Using a software solution to administer your payroll is significantly cheaper than hiring in-house finance personnel to assume that responsibility or engaging a financial services provider that charges hourly or a fixed sum as a monthly retainer.‍
• Guarantee tax compliance: According to the IRS, 40% of small and medium businesses are fined each year for late or incorrect filings and payments. Payroll software ensures you’re handling your federal, state, and local taxes correctly and in a timely manner, effectively reducing your risk of compliance-related penalties.

The main pitfall to free payroll software is that they often are very limited in terms of features. Many of them also limit the number of employees you can pay through them.

Another pitfall of free software products is that they may be temporary, meaning you only get to use them for free for a limited period, and then you have to pay. Free software products can also be temporary in the sense that they aren’t robust and scalable enough to accommodate your company as it grows, which means you’ll need to switch to another provider later on.

One more thing to consider here is this: just because a software product is free, it doesn’t mean it isn’t costing you money. For example, because free products often come with limited automation features and 3rd party integrations, this means your team will do a lot more manual work than they would with a robust, full-featured solution. This waste of your team’s time translates directly into wasting money.

Even with a limited tech budget, sometimes it is better to invest in a paid payroll solution. The key is to identify the features you really need and only spend on those features. This way, you get what you need faster and more efficiently, without spending money unnecessarily.

If you're a small business outside of the US, there are quite a few good payroll tools that you can use for free, depending on where you live. These include: 

• RiseLite: A free payroll software for Canadian small businesses with 20 employees or less.
• PaymentEvolution: Trusted by thousands of Canadian businesses, PaymentEvolution is an affordable payroll software that also offers a free plan.
• Kredily: A free-forever India-based attendance, payroll & HR solution.
• HivePayroll: An India-based payroll software that promises 10x faster payroll processing and can be used for free for up to 3 months.
• Microkeeper: An Australian payroll, time & attendance, and roster system that offers a free plan.
• LinesPay: A Bangladesh-based HR and payroll management system that offers a free trial.
• IceHrm: A Germany-based free online HR Software with leave management, recruitment, and basic payroll features.
• Employment Hero: An Australian all-in-one HR, payroll, and employee benefits platform. Employment Hero also works in Malaysia, Singapore, New Zealand, and the UK.‍
• Baraza HCM: A Kenya-based free HR and payroll system.

There are many payroll solutions on the market, each with different offerings and price points. Be that as it may, the following are some of the most basic features you can expect from most payroll software solutions available today. 

• Calculating salaries: The core purpose of payroll software is to simplify your company’s payroll process. Based on your pay cycle, time and attendance data, garnishments, taxes, and other deductions, payroll software quickly calculates your employee salaries. For your first use, you have to input this data manually, then the payroll software takes over and automatically calculates your employee salaries when each consecutive pay cycle is due.
• Payslips generation: It takes a considerable amount of time to manually prepare and then individually email payslips to hundreds of employees. Payroll software automatically creates payslips and emails them to the appropriate employees with barely any effort on your part. 
• Payroll reports generation: Payroll software automatically generates detailed payroll reports that include salaries paid, allowances given, leave summaries, and so on, allowing your company's management to always be up to date on those figures.
• Records’ maintenance: Payroll software can effectively function as your company’s employee directory; it hosts and allows you to access all sorts of employee-related information such as their start date, designation, current salaries, contact details, and more.

In addition to the features listed above, some free payroll solutions may also pack features for time and attendance tracking, leave management, workers’ compensation reporting, employee self-service, and new hire onboarding. Some free payroll solutions can also integrate with biometric systems that store employee clock-in and clock-out times.

When buying payroll software (or any solution for that matter), we always recommend that you schedule demos with different vendors to make sure their solution is compatible with the needs of your business, before making any final decision. To help you in this process, we’ve put together the following list of questions that you can ask during your demos: 

• Do you offer a full-service payroll solution or just a software tool for customers to run payroll on their own?
• How are payroll taxes handled? How are tax forms generated?
• How are tax filings handled? Is there an extra charge for this?
• How will direct deposit work with our employee bank accounts?
• Do you handle payroll in my state (within the U.S.)?
• Do you handle international payroll? (If you operate internationally.)
• Are you GDPR compliant?
• Are you ACA compliant? What about HIPAA and ERISA?
• Do you offer an employee self-service portal? If yes, can you walk me through what employees see in their accounts?
• What processes can I automate through your software?
• How easy is it to implement your solution, and would I be able to do it myself?
• What are your Customer Support SLAs?
• Do you have a knowledge base with articles and guides for self-service?
• What business solutions does your software integrate with?
• What metrics have you used to prove the effectiveness of your solution, and where can I see these in my analytics dashboard?
• How much does the software cost for my team size?
• How will our pricing change as we scale?

All of the payroll solutions we’ve listed in this guide are fairly easy to implement. You can directly create an account or download an installer from each of the listed vendor’s websites.

Most of the vendors we’ve listed also provide step-by-step video tutorials and help docs that assist customers in getting up and running quickly. For further help, you can reach out to your chosen vendor’s support team. 

In terms of deployment, most payroll solutions are cloud-based, delivered through a software-as-a-service (SaaS) infrastructure. Getting started with a cloud-based solution is very quick as they all allow you to create an account and start configuring your instance and uploading data right away. 

On the other hand, some payroll solutions are self-hosted (on-premise). Self-hosted solutions generally take longer to set up, and depending on your chosen vendor, you may need to consult them regarding their solutions’ compatibility with your current hardware and installation process or better yet, have them do the installation for you.

What is payroll software?

Payroll software is a solution designed to manage, automate, and track recurring payments of a company’s employees. It may also provide features for benefits administration, tax filing and more. 

Who needs payroll software?

All businesses, regardless of size and industry, can benefit from payroll software to streamline how they pay employees and ensure they are handling taxes and other deductions in an IRS-compliant manner.

How are payroll software solutions deployed?

The majority of payroll management solutions are cloud-based, delivered through a software-as-a-service (SaaS) infrastructure. This means you’ll be able to easily access them through most web browsers, either on your desktop or mobile device.

On the other hand, some payroll solutions are self-hosted (on-premise). Self-hosted solutions generally take longer to set up, and depending on your chosen vendor, you may need to consult them regarding their solutions’ compatibility with your current hardware and installation process or better yet, have them do the installation for you.

Can I do payroll without software?

Yes, you can process payroll without the assistance of software. However, manually processing and keeping track of recurring employee payments is quite time-consuming; wasting hours that you could otherwise be spending on bottom-line enhancing strategies and tasks. As such, using a software product to automate your payroll is a worthwhile investment.