Pros and Cons of Payroll Software versus Services

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.