Payroll Software vs. Outsourcing: Which is Right for Your Business?

payroll software

The responsibility of the business owner is to manage the internal team. Employees keep your business in motion. You must make them ensure that they are getting paid on time, and they should be one of your top priorities. Companies seeking help with payroll management bring two options: payroll software or payroll outsourcing.

Both merits and demerits come with these options; select them based on your business requirements. If you like to retain a high degree of control over the payroll process, payroll software might be the right choice. On the other hand, if you need enhanced assistance for payroll, it is ideal to consider outsourcing.

Know about payroll software.

When you deal with tasks such as data entry and minute calculations, payroll management is one of the tedious parts of running a business. Having payroll software makes the job easier by completing the process. When you have good payroll software, it completes the following functions:

  1. Makes payroll calculations
  2. Give rise to payslips
  3. Helps to calculate bonuses, holiday pay, etc.
  4. Produces year-ending reports automatically
  5. Helps to maintain compliance

It provides insights into the payroll process that improves the quality of decision-making. The effectiveness of payroll can be improved effortlessly and less error-prone.

Parameters of selection

You might need clarification about choosing between payroll services and payroll software. But facing it systematically will allow you to make the right decision. Based on the following parameters, take them into account while making your selection. 

1. Budget

You should not look alone at cost only as a determinant. It is better to assume that your choice will influence in a way by the budget you have set aside. The cost of buying the payroll software is less, and also it retains your payroll team. On the other hand, outsourcing can help to strip down the in-house payroll department and make the workers more productive.

2.  Control

There might be a chance to lose control while transferring the business to an external service provider. It is up to you to choose, whether it can be offset by other outsourcing benefits. It is necessary to look at the larger picture in this regard.

3.  Training and subscription

If you go for payroll software, training employees to use the application will be an additional cost. Recurring costs are also there for purchasing annual subscriptions for the payroll platform.

4.  Data security

The payroll system may have tons of data, such as salary information, bank details, etc. It is vulnerable to leakage and cybercrime. Software manufacturers and outsourcing companies have safeguards to prevent such incidents; working with outsourcing is more beneficial in this matter.

This is because they enrol in payroll software and offer additional measures to safeguard the data. Data security is important to the service provider, and they invest other resources to avoid hacking and data breaches.

5.  Assistance

Payroll is a complicated one, and it requires advanced technical knowledge. The lack of expertise could prove costly for a business, resulting in fines and penalties. If you plan to purchase payroll software, knowing that it does not entail access to human expertise is important.

 In contrast, opting for an outsourcing plan will give the benefit of the knowledge of specialists and domain experts and ensures assistance in matters like payroll-related tax filing.


Payroll software comes with packages like accounting or HR management applications that you may have already purchased. There are fewer choices in this case since the decision was made already. Most vendors use cloud-based payroll management software that makes you enjoy the dual benefit.

You can get the advantages of payroll software and payroll services by opting for the latter. Of course, the option depends on the requirements of your business. Following the above parameter, you can decide on your needs, situation, and budget.

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