Payroll management isn’t just essential for business. It’s imperative for employees, with 64% of people living paycheck-to-paycheck. It’s an arduous task where one error brings your pay cycle to a screeching halt — that’s where payroll software comes in!

When it comes to the payroll game, you have two choices: payroll software and payroll services. How do you know which method is right for you? We’ve got you covered!

Get our Payroll Software Requirements Template

Payroll services and software are similar, but just like the same shoe comes in different sizes, they are not a one-size-fits-all solution. We’re here to help you decide which is the better fit for your company.

Here’s a roadmap of what we’ll cover:

• What Are Payroll Services?
  • Features
  • Pros
  • Cons
• What Is Payroll Software?
  • Features
  • Pros
  • Cons
• Integrated HRM and Architecture Considerations
• Next Steps

What Are Payroll Services?

Payroll services are when you outsource to a third-party organization to keep things running smoothly, conducting core processes like tax filing, time and attendance and complete payroll processing. Payroll services provide assistance with federal and state regulations and facilitate administrative tasks.

Payroll Service Features

For companies that want hands-off payroll operations, third-party companies deal with all aspects of payroll processing, ensuring all workforce finances are in order. Take a closer look at common payroll service features below.

• Third-party provider, no in-house hire.
• Form preparation and automatic mailing of forms.
• Direct deposit adjustment and timely delivery.
• Integration with various benefits into the payroll system.

Pros of Using Payroll Services

Hands-Off Approach

Managing payroll is time-consuming. With so many numbers to crunch and boxes to tick, it’s easy to feel overwhelmed and burnt out. With a professional payroll service by your side, say goodbye to triple-checking your payroll.

By outsourcing your payroll, you’ll have peace of mind knowing that everything is taken care of. Plus, with the added efficiency of delegating tasks, you’ll have time to redirect attention to core operations and grow your business.

Enhanced Assistance

Professional services provide further guidance compared to typical software packages. One prime example is ‌tax filing. An annual business tax filing is complicated. It’s very relational and involves a lot of decision-making. Payroll services offer professional help navigating tax laws and the filing process (remember that not every service completely takes over your tax filing).

Cons of Using Payroll Services

Steep Cost

One of the biggest downsides of hiring a payroll service is the cost. Subscription pricing models offer access to payroll software at affordable prices. Budget these subscription prices into your operating costs.

Some companies also offer bundling, like QuickBooks by Intuit, a popular business payroll system offering bundled services for other accounting work that help businesses save money.

Difficulty Accessing Data

Modern technology eliminates clutter caused by filing cabinets, opting instead to move vital information to secure online platforms. If you’re using a cloud-based platform, outages may occur. In general, there’s a higher chance of running into wait time when obtaining necessary information because it’s not at your office. Like any delay, it’s unpredictable how long your wait will be.

Third-Party Errors

While payroll service providers reduce the risk of human errors, there’s still a chance of a mistake occasionally occurring, like delays from system outages. Ultimately, any mishaps are your company’s responsibility. It’s smart to research the providers you’re considering outsourcing your payroll to and ensure they have a good reputation.

Compare Top Payroll Software Leaders

What Is Payroll Software?

Payroll software is a solution that’s either cloud-based or on-premise, helping businesses process payroll, manage time and attendance and automate HR tasks. Typically, payroll software includes mobile apps for working on the go.

The key difference between a payroll service and payroll software is the level of involvement of the employer. Consider payroll software like a toolbox and a payroll service like hiring an expert like a plumber or electrician.

Common uses of payroll software by in-house personnel include:

• Implementing payment methods for employees
• Calculating wages
• Cataloging pay and scheduling data
• Retrieving data for tax filing purposes
• Storing data about benefits and retirement

Payroll Software Features

A lot of companies get by with payroll suites that automate aspects of financial operations. These software types make efficiently managing payroll easier.

Payroll systems include their benefits and disadvantages. While there are some processes that these types of software handle well, there are also some drawbacks.

Here are common aspects of in-house payroll software:

• 401(k) integration
• The ability to add and customize benefits
• The capability to create custom reports
• Mobile clock-in/clock-out technology

For a full rundown of what to look for and expect in a payroll solution, check out our payroll requirements checklist article.

Pros of Using Payroll Software

Easy Modifications

Management teams have access to the payroll operations through the platform and tailor the software accordingly. Authorized users make changes as needed without waiting around for access (more on that below).

In contrast, businesses that employ a payroll contractor need to contact the service company to change their processes, which has a much longer turnaround time for crucial modifications compared to the quick-fix benefit of an internal payroll system.

Enhanced Internal Control

With in-house software, you don’t have to worry about third parties poking around your finances or accessing sensitive data, like employee social security numbers. Keeping payroll processing under the umbrella of in-house systems, instead of outsourcing the function to a payroll service, keeps information tight-knit.

With payroll software, you manage access rights to ensure important information is only viewable to those needing it.

Simplified Access

Many payroll solutions offer a mobile-friendly design and online delivery architecture. With these capabilities, internal users who need access to payroll data get it from wherever they are.

Improved Long-Term Vendor Relationships

Software vendors help with automatic updates and provide other types of services, such as adding different service modules. Access to vendor assistance offers some benefits of a payroll service, like expert know-how and troubleshooting.

Cons of Using Payroll Software

Steep Learning Curve

Many of these payroll software packages require more training for internal staff members. It may take time for employees in your human resources department to figure out how to do various payroll tasks and become fully efficient. A payroll service reaches this point immediately due to their professional knowledge.

Additional Fees

Companies should look at the fees attached to payroll software products to ensure they’re not excessive in terms of the actual value the company will get from the system.

Integrated HRM and Architecture Considerations

Along with the pros and cons above, there is also the idea that payroll products come in a more extensive suite of human resources software, so it’s important to consider what kinds of business IT architecture to go with and whether you need payroll software or if it’s time to hire payroll services.

Many integrated HR platforms have built-in payroll. HR systems also offer payroll, self-service portals, training tools, attendance tracking, scheduling and payments in one unified platform. With this level of organization at your fingertips, managing your business finances has never been easier. Remember to keep these key features in mind when choosing your IT architecture.

Compare Top Payroll Software Leaders

Next Steps

When it comes to choosing between implementing payroll software or enlisting the help of payroll services (to quote Run-D.M.C), it’s tricky. The biggest deciding factors are your business needs and existing processes. Security, accessibility, budget and your desired level of involvement in payroll processing are all major parameters during decision-making. Keep your must-have list handy, and whether you enroll in payroll services or software, your payroll will be in good hands.

Ready to take the next step in your payroll search? Check out our free payroll requirements list to see what capabilities you should look for in a solution, and grab a free copy of our payroll comparison report to see how different products stack up against each other.

Which payroll option do you prefer, third-party payroll services or using payroll software? Let us know in the comments below!