The Pros and Cons of Online Payroll Services
switching payroll companies

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 services.


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 experiences.

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 and HR 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, PricewaterhouseCoopers, Business Week, Killer Startups, Houston Chronicle

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