Choosing between Payroll Software and Payroll Services is a tough choice every business owner has to face at some point. There are three main methods of running payroll for the small business owner: manually, a DIY software, or a payroll service. While manual is not recommended, payroll software and payroll services each hold their own pros and cons making your payroll processing method a personal business choice:
Payroll Software Pros:
- Control- you have control of all the details of running payroll, creating and view reports, and paying employees and payroll taxes.
- Cost- usually less than you’d spend on payroll services.
- Time Savings- compared to manually running payroll, you save a lot of time with software.
- Security- someone hacking in and stealing your payroll information is less likely when you have control.
- More data- you have easy access to any and all payroll data at any time.
Payroll Service Cons:
- Time- running payroll takes time. If you make a mistake you could spend a lot of hours trying to fix it.
- Staff- it takes time AND manpower to run payroll. Depending on your company size or complexity, payroll can take a lot of manpower to run in-house.
- Errors- In-house payroll accuracy cannot be guaranteed so you are more at risk for IRS penalties.
- Up-front Investment- some payroll software come with a hefty price tag. Annual fees are something to take into consideration too when evaluating overall cost.
- Learning curve- DIY software can be complex and the learning curve could be steep.
Payroll Service Pro
- Time savings- You save a lot of time in comparison to manual methods and payroll software.
- Free Up Staff Time- Payroll services opens up more time for employees to focus on other areas of your business.
- Cost effective- Payroll Services are cost effective for many companies after you add up the software costs and the staff costs to run it.
- Accuracy Guaranteed- Payroll services often guarantee accuracy of their payroll processing which reduces your liability for mistakes.
Payroll Service Cons
- Cost- Payroll Services often cost more than payroll software methods
- Less nimble- You don’t have access to as much data as you want, when you want it.
- Less control- you sign up for a service with set offerings.
- Expectations versus reality for service- might not be the same.
- Data security- although companies put a lot of effort into data security, it is more at risk when outsourcing.
- Initial cost- Set up costs for services can be expensive.