Your Guide to Software Selection

Compare Payroll Software vs. Payroll Services

Payroll capabilities are one of the top requirements for HR software buyers.  Businesses of any size have to make choices about how to handle the daily work of payroll management. There’s constant representing of earned wages and getting money into employee accounts — and there’s the long-term responsibility of filing payroll taxes and keeping annual records.

Companies can choose to do payroll manually, or they can employ various kinds of modern payroll software packages. They can also choose to outsource all of this financial work to a payroll service.

Here are some of the considerations that companies think about when determining whether to keep payroll in-house using payroll software tools, or let a third-party company handle payments, tax work and more.

Payroll Software – Pros and Cons

Lots of companies can get by with payroll software packages that automate aspects of payroll operations. These types of software can make it much easier and more efficient to:

  • Set and implement payment methods for employees
  • Calculate wages
  • Store pay and scheduling data
  • Retrieve data for tax filing purposes
  • Store data about benefits and retirement

Payroll software packages also come with their own benefits and disadvantages. While there are some processes that these types of software handle well, there are also some drawbacks to using a payroll software package to handle payroll operations.


Easier to make changes — managers and leadership teams have upfront access to the payroll operations through the software, and can tailor the software accordingly.

More internal control — businesses don’t have to worry about third parties poking around in their finances, or getting different types of data, such as employer Social Security numbers or identifiers.

Easy access — many of these software packages offer a mobile-first design and online delivery architecture so that internal people who need access to payroll data can get it from wherever they happen to be.

Long-term vendor relationships — software vendors can help with automatic updates, or provide other types of services, such as adding different kinds of service modules.


The learning curve — many of these payroll software packages can require quite a bit of training for internal staff members. It may take time to get everything efficient, and to figure out how to do various payroll tasks that a payroll service could do based on their professional knowledge.

DIY responsibility for mistakes – this is a big one with payroll software use, as opposed to going in and hiring a payroll service contractor. Internal people can end up missing forms, or get numbers wrong. The business will be responsible for all of these mistakes, and fixing them can be time intensive and costly.

Fees — companies always have to look at the fees attached to payroll software products to make sure that they’re not excessive in terms of the actual value that the company will be getting out of the software.

Payroll Services – Pros and Cons

For companies that want ‘hands off’ payroll operations, third-party companies are only too willing to take over all of the aspects of handling either employees or contractors, and making sure that all workforce finances are in impeccable order.


It’s Easy – one of the biggest advantages of using a professional payroll service is that managers and leaders simply don’t have to worry about the details. This frees them up to focus more on core operations and growing the business. It can be a very efficient way of delegating peripheral tasks and outsourcing some of the busywork that cheats people tied up in the details of the business and unable to innovate.

Enhanced Assistance – professional services also give more assistance than what can be found in a software package. One of the best examples is in the area of tax filing. An annual tax filing for business is a complicated affair — it’s not something that’s easy to do only on paper. It’s very relational and can involve a lot of decision-making. With that in mind, professional services are able to offer more assistance than software packages, which require a lot of strategy and strategic use by client companies.


Cost — one of the biggest downsides of hiring a payroll service is the cost. Companies that can get by with payroll software and in-house operations can save a great deal of money.

In addition, companies can use subscription pricing models to get access to the payroll software at affordable prices. They can budget these subscription prices into their operating costs. Some companies also offer bundling — for instance, Intuit is one of the most popular business payroll systems that offers bundled services for other kinds of accounting work that will help businesses save even more money.

Along with the above pros and cons, there is also the idea that payroll software products are often embedded in a greater suite of human resources software. This is an important thing to think about when choosing what kinds of business IT architecture to go with, and whether to use payroll software or hire payroll services.

Many integrated human resources management software platforms have payroll built in. They also have integrated resources for training, attendance tracking, scheduling and payments. They may even have portals for self-serve data, where employees can access their financial information, and other features such as conflict resolution tools. This is something to think about when making choices about an IT architecture for an enterprise.

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  • Garrett - June 4, 2018 reply

    Definitely agree that there are pro and cons to both resources, and it really just depends on the size and complexity of your company, as well as your accounting personnel. If you are a small business looking for low-cost payroll sofware, I highly recommend Advanced Micro Solutions.

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