Advantages and Disadvantages of Payroll Software Versus Services

The choice between payroll software and payroll services is a difficult decision that every business owner must face at some point. There are three main methods to perform payroll for the owner of a small business: manual, DIY software or payroll services. While manual is not recommended, payroll software and payroll services each have their own advantages and disadvantages, making your payroll method a personal business decision

Payroll Software Advantages

• Control - You are in control of all the details of payroll, report generation and display, and employee and payroll tax payments
• Cost - typically less than you would spend on payroll services
• Save time - compared to manual payroll, the software saves you a lot of time
• Security - when you're in control, it's less likely that someone will hack in and steal your payroll data
• More data - You have easy access to all payroll data at all times
  

Payroll Software Disadvantages

• Time - A scheduled payroll takes time. If you make a mistake, you can spend many hours trying to fix it
• Staff - Running payroll takes time AND manpower. Depending on the size or complexity of your business, payroll accounting can require a lot of manpower
• Errors - The accuracy of the company payroll cannot be guaranteed, leaving you at greater risk of IRS penalties
• Up-front investment - Some payroll software comes at a high price. When evaluating the total cost, annual fees should also be considered
• Learning curve - DIY software can be complex and the learning curve can be steep

Payroll Service Advantages

• Time saving - You save a lot of time compared to manual methods and payroll software
• Time saving for personnel - Payroll accounting gives employees more time 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 personnel costs of running the software
• Guaranteed Accuracy - Payroll services often guarantee the accuracy of their payroll processing, reducing your liability for errors

Payroll Service Disadvantages

• Cost - Payroll services often cost more than methods of payroll software
• Less nimble - You don't have access to as much data as you want and when you want
• Less control - You sign up for a service with fixed offers
• Expectation and reality of the service are not necessarily identical
• Data security - Even if companies invest a lot of effort in data security, it is more at risk when outsourcing
• Initial costs - Set-up costs for services can be expensive

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