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The Pros and Cons of Online Payroll Services
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Workforce Management

The Pros and Cons of Online Payroll Services

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

for payroll.”

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

accurate filing.

3. Compliance best practices

In addition to tax compliance, many payroll companies can also help with

employment and labor compliance through HRIS systems and

time & attendance solutions.

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

custom reporting

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.

_Sources: Inc.com,


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