Payroll Software vs. Payroll Services: 5 Key Differences
byPayroll software and payroll services both aim to help business owners run payroll. However, despite their shared goal, the two boast stark differences regarding cost, control, and security. When manual payroll is not an option, comparing these two alternatives may be able to help.
Here are five key characteristics to keep in mind about payroll software vs. payroll services:
- Payroll software is a tech-based solution that automates payroll processing.
- Payroll software does have a learning curve, so go with a well-supported solution.
- Payroll services are expensive and best suited for those with larger budgets.
- Payroll software can solve your compliance issues while saving time and money.
- Payroll services sometimes come with an accuracy guarantee. However, there may be a trade-off in terms of data access and security.
Table of contents
- What is payroll software?
- What are payroll services?
- Payroll software vs. payroll services: five differences
- How to choose between payroll software and payroll services
- Elevate your payroll process with When I Work
What is payroll software?
Payroll software is a computer-based solution for processing payroll. It can run entirely on your computer or online in the cloud. Payroll software runs on a secure system, and only certain employees can access it.
Payroll software usually includes many features that make payroll easier. These can include time tracking, messaging, and mobile apps for HR pros and employees.
Most payroll software offers some level of automation. These programs can easily automate wage and withholding calculations. Some can even run your payroll on schedule, while others can file taxes without you lifting a finger.
Who uses payroll software?
Many types of businesses find benefits to using payroll software. For instance, small businesses don’t always have money for an HR team. Software helps them pay taxes correctly and on time. It also helps them avoid legal issues that can devastate small businesses.
In addition, large businesses have so many employees that manual payroll would be too difficult. Payroll software makes paying hundreds of people much easier. It also makes keeping payroll records a breeze.
Other companies that use payroll software include healthcare, construction, and education businesses, which all pay employees at different wages and status levels. Payroll software makes it easy to pay different types of employees at once.
No matter the industry, though, payroll software makes processing quick and easy.
Advantages
Using payroll software gives your company total control over the payroll process. You can make changes and decisions without having to contact anyone else. Furthermore, payroll firms charge a lot of money for what they do. Payroll software costs much less, especially for large companies.
Payroll software also saves a lot of time. Automated features make the process very efficient. In addition, businesses using payroll software don’t have to worry about data security. Many platforms use encryption and other security measures to protect sensitive information.
Finally, using payroll software gives you easy access to your data. This means you can get custom reports and gather business insights any time you want.
Disadvantages
While software does provide an automated solution, it’s not magic. You still need someone to set up the software. Someone must also input data for new employees and make changes as needed. This requires time from a staff member.
Additionally, most software has a learning curve. You might not know how to use it right away. For this reason, it’s important to choose a software company that has a support team ready to show you how to use each feature.
What are payroll services?
Payroll services are businesses that take care of the whole process on your behalf. Some let you pick and choose the services you want. For example, you may want them to do your payroll but have your own accountant for taxes. Others just take over the process from start to finish. This would include onboarding employees, tracking time, disbursing the money, and filing taxes.
If you work with a professional employer organization (PEO), they become the co-employer of your workers. Your job is to operate the business. The PEO takes over administrative tasks, especially those related to payroll.
Every firm offers something different. Because of this, you must do your research before you use a payroll services company.
Who uses payroll services?
Any business can use a payroll service, but larger companies likely use them more often. These services cost a lot of money. Small businesses don’t always have the funds to invest. Unless the payroll firm services a large number of employees, it may not be worth the cost.
Highly-regulated businesses might also use a payroll service. These include the finance, transportation, and manufacturing industries. Some payroll services offer a guarantee that they won’t have any processing errors. This means they take all responsibility for any payroll or tax problems. Businesses in which compliance is key might want to take advantage of that offer.
Advantages
With payroll services, you won’t have to be involved in the process at all if you don’t want to. This also means you won’t need any HR staff to run it. Many payroll services have guarantees about their accuracy. If they mess up, they will take full responsibility for the consequences.
Disadvantages
The biggest reason businesses don’t invest in payroll services is that they cost too much. The price for these services is high. Not every business has the money or wants to spend so much of it.
In addition, payroll services are not in-house solutions. You cannot always have access to your data when or how you want. This limits your business insight and delays your decisions.
A payroll service also doesn’t always give you control over the services you use. They sometimes offer one-size-fits-all packages, requiring you to take it or leave it.
Payroll services increase your data security risks as well. This means you have no control over how another company addresses network security. You are opening yourself up to possible third-party data breaches.
Payroll software vs. payroll services: five differences
Payroll software and payroll services both help you run accurate payroll, but they’re not the same. Here is a rundown of the major differences between the two solutions.
1. Payroll services often handle all aspects of the payroll process
Payroll services allow someone else to handle every part of the payroll process from start to finish. This often means that schedule and timesheet tracking, tax calculations and filing, and money disbursement are out of your hands.
Payroll software does automate the process. Still, it’s all handled by you or one of your own employees.
2. Payroll software grants more in-house control
With payroll software, you have control over everything. You can customize payroll to run any way you want. You can also keep watch over your own data security to ensure it never falls into the wrong hands.
With payroll services, you must give up control to a third party. While you don’t have to take the time to run payroll, you also can’t determine what happens to your data.
3. Payroll services back the accuracy of their work
Many payroll services guarantee that their work will be accurate, taking full responsibility for any compliance issues that arise. Still, it’s important to know that you may ultimately be held responsible for mistakes.
Payroll software gives you the peace of mind of being able to check over payroll before it’s processed. Because it’s computerized, it’s also highly accurate and can help you maintain good legal standing.
4. Payroll software offers more data security
Payroll software is often run from the cloud. This makes it a very secure solution for those concerned about their data security.
Though most payroll services will offer some security, you don’t always know what their protocols look like. If a data breach occurs with a third party, you might still be liable.
5. Payroll services are built with larger budgets in mind
Payroll services cost a lot. They’re not very cost-effective for businesses with a smaller budget. In comparison, payroll software usually costs much less. Best of all, it can scale with you as your business grows.
Payroll software vs. payroll services: what is best for your business?
There are several things to think about before you decide which solution to use. Considering each of the following areas of your business will help you determine the right way to go:
Your budget
This will be what helps you see whether payroll services are an option for you. These services are very expensive. If you don’t have the money or don’t want to spend it, stick with payroll software.
Your business needs
Payroll services are only worth a look if you have a lot of employees. If you have fewer than 50 employees, you may want to consider handling payroll in house. Automated software can help when you’re short on time.
The level of control you want
Payroll software is best for those who want the most control. You can customize your process and your reporting. With payroll services, you may not get the level of access you want.
Data security
Keeping payroll in-house can reduce your security risks. Allowing a third party to have access to sensitive data can open you up to compliance issues.
