How To Decide Whether You Need A Payroll Software Or A Payroll Service?


Pros & Cons- In housing Vs Outsourcing

Payroll is complex, we get it. Don’t hasten to choose a rescuer that will ultimately confuse you further. Let’s go slow, shall we? To start with, determine what your needs are. Next, think about whether you’d want to hire a software to automate the process within the company itself or take the help of a third party to execute the task on your behalf.

One of the most dominant, important, and skeletal parts of a company is its payroll. The time-consuming and frustrating bits of this process actually make up for the chunk of it. Hence, some business owners tend to opt for payroll services by outsourcing them. But mind you, this route is pretty expensive. On the other hand, payroll software allows you to do all that the service provider was doing for you but with your major role in it.

This brings us to the classification of payroll provisions:

1) Payroll Software

2) Payroll Service

Now to our main question- Which one to choose?!

As I said earlier, you need to evaluate the feature, advantages and disadvantages of each based on your needs. Let us jump to it and determine the one that suits your company the best.

1) Payroll Software:

Often a part of the HRMS package, a payroll software automates all the tedious and mind-boggling tasks pertaining to the finances of a company and its employees. It eradicates the chance of human errors and makes the process seamless. One of the major USPs of this option is its compliance with the government’s regulations. You may no longer need to hit your head over staying compliant.

However, there are certain things you have to keep in mind before choosing your payroll software:

  • Simplicity
  • Company’s budget
  • Trustworthiness
  • Risk factor
  • Integration capability
  • Accuracy

After you pass these hurdles, delve into its pros and cons:


  • The remote is in your hands:

With payroll software, have everything centralized on a dashboard so can you control it sitting on your sofa. Implementation of changes becomes easier, with no need to contact someone else for the same. If anything needs to be changed, adjustments can be made accordingly, making it a tailor-fit product.

  • No data breach=peace of mind:

As all the data is kept within the organization, you will have no fear of the company data being stolen by any third party. The adoption of software bestows upon you the power to give access to only the most critical employees. You cannot risk trusting anyone with your company’s financial data.

  • Access details anytime, anywhere:

With the invention of smartphones and laptops, it is like carrying your office wherever you go. This being said, internal employees could require using payroll for a certain task outside office. Hiring a payroll service literally wipes out your chance of doing this work through mobile phones or laptops.

  • Save some extra cash:

When compared to a service provider, payroll software is usually less expensive. It gives you the freedom of choosing the plan that you want to according to your company’s size. As a small business, you’d not want to empty your already tight pockets.


  • Tutoring can be time-consuming:

A new software means learning it first to be able to use it. HRs and the concerned staff would have to spend a lot of time in understanding the product’s functionality to work. Meanwhile, service providers, with their professional expertise, can fasten the process and start working with it quickly.

  • No blame-game:

Mistakes are bound to happen when inexperienced people use a high-tech software. As there is no role of an outsider, the (costly) consequences of the employees’ errors will have to be dealt with by the company.

  • Monetary concerns:

Though it is more affordable than a service provider, payroll software still takes cash out of your bank account. Moreover, certain software don’t deserve the price tag they come with. Make sure to go through the features list thoroughly before finalizing. Choose the one that suits your company.

2) Payroll Service:

Think about a fancy restaurant. You cannot change or modify the taste and ingredients of the food dishes available there but it is served on a plate to you- zero work needed from your end. All you need to do is gobble it up. This, in a nutshell, is how a payroll service provider works. If you want to keep your hands off the entire payroll scenario, these people are your best bet in ensuring the work still gets done impeccably.


  • No need for self-service:

Hiring experts to do the tasks mean the staff do not require to learn the software from scratch   and begin work post it. Payroll service companies do it all for you.

  • Frees up time:

As service providers take the frontline, your employees are left with more time to focus on the core operations of the company. It is like giving your problems to someone else to solve. As an employer, you can then stop worrying about the complexities of the department.

  • Puts your tax compliance worries to sleep:

With professionals handling your work, staying compliant becomes the least of your worries. Service providers ensure that all the laws and regulations are met in the right way to avoid legal problems.

  • Guaranteed accuracy:

It is more like the ‘A’ graders of your class doing the homework for you while you spend your time doing other things. The teacher just cannot find any mistakes in your work. Service providers have staff that excel in payroll and cannot go wrong with it.


  • Money flows like water:

Unless you are really blessed with huge investments or are absolutely ignorant on the functioning of software, not many would recommend you to take this path due to the cost of it. Every good thing comes at a price. However, you can save a lot of finances if you don’t choose this.

  • No say or control in the process:

You sign up for a service with set offerings when you select a service provider. Things cannot be altered as per your preference or wants and you’ve to accept what is being given in the package to you.

  • Exposure to risks:

Handing over your payroll information to another company always brings the risks of getting your data stolen. Data theft is not a new concept. Majority of the companies work with strict data protection guidelines due to the sensitivity of it. Imagine that information being in the hands of someone else. Nightmare!

  • Expectations Vs Reality:

Or an example of expectations vs reality. You don’t always get what you’re shown. The same can occur with your payroll service provider. They might show a colorful picture only to deliver a grainy black and white one.

Whatever you choose, ensure you do your research, read enough case studies and actually talk to other customers of the company to get first-hand advice. Go for the one that seems trustworthy, simple, efficient, and cost-friendly. One of the products with similar attributes is Keka. Built with the trust of 3000+ customers, it is a one-stop solution to all your payroll-related problems. Make sure to check more about it here. Best of luck with your payroll process journey! May the Gods of payroll be in your favor!

Interesting Related Article: “3 Signs it’s Time to Upgrade Your Business’ Payroll System