What it means
Payroll software turns hours worked or a fixed salary into net pay. It applies tax rules, benefit deductions and any court-ordered withholdings, then produces payslips and records for each pay period. It differs from HR software, which stores employee records and supports hiring and performance, although many HR suites include a payroll module. It also differs from accounting software, which records the resulting costs in the ledger.
Why it matters when you buy software
The main buying question is how much of the work the vendor takes on. Some products only calculate pay, while others also file taxes and send payments. Check which tax filings and pay frequencies are included, which regions are supported, and whether contractor payments or accounting integrations sit on higher plan tiers.
How it works in practice
An administrator enters pay rates and hours, or imports them from a time tracking tool. The software calculates gross pay, deductions and net pay, shows a preview for approval, and then runs the payment. Employees usually receive payslips through a self-service portal, and the totals can be exported to the accounting system.
See also: Time and attendance, Applicant tracking system and the glossary index.