Payroll Software or Payroll Service – Which is Best for Your Business?

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Every business that pays employees knows that the process can take up time and resources within your business. From managing earnings and deductions, to entering hours worked, to paying taxes and so on, the process can quickly grow to be complex. That is why it is more important than ever to choose a method of paying employees that works best for you. Consider these tips for choosing the right payroll management system for your business.payroll software or payroll service


Whether you use software or a service, you will need to consider staffing and who will manage what. When using a service, the process is streamlined, but somebody will still need to keep track of and submit hours worked and other information to the payroll service. When using software, the payroll person will likely spend more time managing payroll, since the generation of pay checks (or direct deposit), tax filing, and other functions will all be done in-house rather than by the service.


There are costs associated with payroll services as well as payroll software. Since the payroll service takes part of the work load off your shoulders, the cost is typically more as well. Just make sure that when you are getting pricing information you include all of the functions you need. In both payroll software and payroll services, some functions can be considered add-ons and incur an additional fee, such as direct deposit and online tax filing. Making sure you receive a quote for all the payroll functions you require can save you from receiving surprise expenses down the line for things your business must have.

Another important difference is cost per employee. With fewer employees, the cost for payroll service may be less expensive but as employee numbers increase, payroll service costs increase proportionally. The cost to maintain in-house payroll software is normally a fixed amount so with larger employee numbers, the cost per employee decreases proportionally. Cost differences can be significant based on employee numbers.

Data Security

Payroll information requires strong security, whether using a service or software. If you are using a service, data is typically accessed via the internet, so be sure the provider’s security is trustworthy. With payroll software, data security is still a consideration, as you don’t want just any employee to be able to access the system. A feature like menu level security provides the ability for employees to access only certain screens you deem necessary.

Reporting and Special Considerations

One main reason people consider payroll software is the flexibility it offers in reporting and setup. If your business has special payroll needs, such as multiple pay rates per employee in one day or departmental reporting, you may find payroll software to be more conducive to your needs.

Simply put, payroll software can offer business more control over their payroll, while a payroll service can take away some of the burden. Payroll software can also save money when compared with a service; however be sure the staff is available to operate the system.

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About the Author


Stephanie Elsen

Stephanie Elsen has more than 15 years of sales and marketing experience, with jobs ranging from large to small manufacturers, and more. Through this she learned about inventory management, accounting and payroll functionality, and gained first-hand knowledge about how software integration makes a real difference. She understands how business software can help companies improve their processes and profitability. Stephanie currently works as Web Marketing Manager at Red Wing Software, an accounting and payroll software developer in Red Wing, Minnesota. In her spare time, she enjoys teaching computer and internet marketing classes at Small Business Development Centers and through Community Education.



Good article to avoid confusion on payroll.

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