Increasing efficiency is one of the biggest challenges facing
businesses today. More and more organizations are outsourcing business
processes such as payroll to third-party providers who can perform those
functions more efficiently.
“One of my rules is if you have one employee, get a payroll service,”
says Rhonda Abrams, author of the guidebook Hire Your First Employee.
“The penalties for screwing up are so much more expensive than the cost
With that in mind, you may be wondering if using an online payroll
provider is the right choice for your organization. Here are some pros
and cons you should consider when deciding to use online payroll
Pros of switching to an online payroll service
1. More efficient and cost-effective
Using online payroll software allows you to complete payroll within
minutes—not hours and hours. The online format allows you to easily
calculate pay based on hours, overtime and bonuses, while keeping track
of PTO. This frees up your staff to focus on more important things,
like growing the business.
In addition, according to PricewaterhouseCoopers, companies that
outsource payroll spend 18 percent less on average than businesses
that keep it in-house. Time is money, and outsourcing payroll processing
is a simple way to regain valuable hours.
2. Taxes filed correctly and on time
The IRS penalizes about one out of every three business owners for
payroll errors, and statistics from BusinessWeek say they issued $4.5
billion in penalties related to employment taxes last fiscal year.
Partnering with a payroll services provider gives you access to tax
experts and automated processes for ensuring correct, timely and
3. Compliance best practices
In addition to tax compliance, many payroll companies can also help with
employment and labor compliance through HRIS systems and
Legal and regulatory compliance only gets more complex as your
business grows, so it’s crucial to find a provider who can grow with
you and mitigate risk in these areas.
4. Quick access to data and analytics
Having cloud-based payroll software allows for secure, on-the-go access,
so you can view and edit employee information when and where you need
to. Many software providers also offer analytics dashboards and
so you can create whatever reports the CEO is asking for, such as a
year-to-date or labor distribution report, in a matter of clicks.
5. Employee self-service
The beauty of the cloud is secure online access, enabling employees to
have access to what matters to them—such as pay stubs, time off requests
and personal information. Some companies provide free mobile
apps that give
employees access to this information straight from their mobile device.
6. Easier for the staff
A user-friendly online payroll software will be simpler for newer staff
members to learn and use compared to a cumbersome in-house process. With
a workforce that changes jobs every few years, ease-of-use
significantly shortens the learning curve for new administrators.
Cons of online payroll services
1. Some loss of control
For organizations that have always done payroll in-house, switching to
an outsourced provider can feel like a loss of control. However,
having an online platform means you will still have complete
visibility into employee wage details, payroll cash requirements,
vacation balances and other important data.
2. Security and accuracy concerns
Not all payroll companies are created equally, so it’s natural for
organizations to harbor some concerns about whether their data will be
secure and whether mistakes will be made. Be sure to speak with your
potential providers about their security measures and controls, and
don’t hesitate to ask to talk with current clients about their
3. Paying for services you don’t need
Some payroll providers will attempt to tack on extra services your
company may not need yet. While it’s good to know that more robust
solutions for HR, timekeeping and applicant tracking are available
should you need them in the future, the sales representative should
take time to understand your current needs thoroughly before
recommending a solution.
4. You are still ultimately responsible
Many businesses may not understand what is expected of them going into a
relationship with a payroll provider. While these companies can
streamline your processes and help with compliance, they won’t be able
to do it without your input. For instance, if your business fails to
provide accurate tax information and the provider then files
incorrectly, you are responsible. Carefully review expectations with
your representative to ensure smooth sailing later on.
What’s the right choice for you?
Many organizations have found success with outsourcing payroll and using
online payroll software, but it is up to you to decide what is best for
your company. You may find this Buyer’s Guide to Simplifying Payroll
helpful as you journey through the decision process. If you run into
questions, feel free to reach out to a
Paycor representative who can consult with you about your needs and
whether online payroll would be a good fit.