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Written by Angela Tan, Taiwan   
Thursday, 29 September 2011 11:30



Payroll System Advantages and Disadvantages


When it comes to executing payroll, companies usually grapple between two choices: 1) keep it in-house and process it manually or 2) outsource it to a specialized payroll service. While using an external provider can alleviate many of the hassles of processing payroll yourself, there are several factors to consider before taking the leap.

Advantages of Payroll Services

·         Cost savings. While it may make sense for large companies to maintain payroll departments, it's not always cost-effective for companies with fewer than 20 employees to do so. Calculate how many hours you spend on payroll-related activities (be sure to include check printing and distribution as well as creating tax documents) and compare the cost of wages to the cost of plans offered by payroll service providers. Also be sure to factor in other quantifiable expenses, such as software and IT management. With all costs considered, payroll services may provide an affordable alternative.

·         Time savings. Payroll is very time consuming, requiring meticulous attention to detail and monitoring of the latest legislation related to payroll taxes. By eliminating this function, you and your staff can focus on the core functions of your business and devote more time to revenue-producing endeavors.

·         Access to the latest technology and legislation. Continually upgrading software can be a financial drain for any business – especially if there is a need to hire IT professionals.  When you enlist a payroll services provider, you'll have access to the latest available technologies and will stay abreast of emerging trends regarding payroll tax laws, payroll requirements, and other regulations.

·         Expert insights and specialized skills. Payroll service providers have an in-depth knowledge of tax-related laws on all levels – federal, state and local. With access to vast technical resources, a third-party specialist can process even the most complex compensation plans with ease.

Disadvantages of Payroll Services

·         Cost. In some instances, it may be more cost-effective to keep payroll in-house than to utilize third-party services – especially if you're looking at costly traditional payroll services. Be sure to consider online alternatives to traditional companies that offer all the same services and guarantees for a lot less. Crunch the numbers and determine which option makes the most financial sense for your business.

·         Confidentiality risk. When outsourcing payroll, vital employee data and salary information must be shared with the service provider. While reputable payroll companies adhere to strict privacy protocols, many employers are apprehensive about relinquishing confidential, secure information.  It may be safer to enter payroll yourself online, as opposed to calling or faxing it in to a payroll service, so make sure to consider online services.


In more instances than not, payroll outsourcing has a positive impact on operational efficiency and productivity.  Nevertheless, your decision about whether to hire an external payroll service provider should not be taken lightly. After carefully evaluating the pros and cons, you'll have a better grasp of whether utilizing a payroll service will be in your company's best interests.


Last Updated on Thursday, 03 November 2011 17:41
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