Payroll Software, Payroll Services, Online Payroll – What’s the Difference? Which is Best?

Selecting the right payroll solution is an important decision for all business owners. The wrong payroll solution can be expensive not only in terms of money, but in productivity, which translates back to morale, which translates back to money. When selecting billing solutions, carefully consider your resources. Here are brief descriptions of each type, and…

Selecting the right payroll solution is an important decision for all business owners. The wrong payroll solution can be expensive not only in terms of money, but in productivity, which translates back to morale, which translates back to money. When selecting billing solutions, carefully consider your resources. Here are brief descriptions of each type, and the resources you need to implement them:

Payroll Software – Payroll within Accounting Software

When using payroll software, or when running payroll within your accounting software, your company runs payroll “in-house.” Your company is responsible for all upgrades to the software, including tax table and tax rate changes. This option provides a high level of control, which some clients prefer. Generating checks, withholding taxes, tax return filings, and payroll tax payments are the main duties that must be carried out in a timely manner by someone within the business. Electronic services, such as direct deposit, may or may not be available through the software.

To run payroll in this manner, you need a person who is not only familiar with payroll laws, but also familiar with the accounting side of payment. Payroll is confusing, even daunting, so do not expect a $ 9 an hour clerk to set up and run your payroll.

Speaking of payroll set-up: be certain your software provides excellent customer support during the set-up process. Depending on the number of checks run in the current year, payroll set-up can be challenging, to put it mildly.

If you have many checks to print, consider buying a printer specifically for this purpose (it can also be used to print accounts payable checks). Contact your check vendor for more information about ordering the correct type of check for your printer.

In terms of the monthly expense, this option will probably run between the next two options.

Payroll Services

When using a payroll service, your company outsources payroll duties entirely. You are in contact with the payroll service as often as you run payroll (for example, every week or every two weeks), telling the service how many hours each employee worked, informing the service of new or terminated employees, or asking any other questions . The payroll service will then generate and deliver checks; withhold taxes; make tax payments; file tax returns; and compute, distribute, and file year-end forms. Electronic services are available. Human resource (HR) services are sometimes available. Usually you can find a payroll service in close proximity to your business.

This is a very simple option. A phone call to the payroll service takes care of most payroll duties. This is a good option for those who do not want to take care of pay duties themselves, and who do have other resources (such as time or personel) to run payroll in some other manner. Even the set-up should be trouble free, since the payroll service will handle it.

This option is the most expensive of the three options.

Online Payroll – Internet Payroll

Online payroll, also known as Internet payroll, can be customized to suit the client's needs. For clients who wish the ease of a payroll service, wanting only to make a phone call each payroll period with the service taking care of everything else, online payroll can provide that. For clients who prefer the control that payroll software brings, wanting to run checks and take care of other duties “in-house,” online payroll can provide that as well. Even something in between these two options is possible. The level of service varies from one provider to another. Even within a single provider there can be varying levels of service, depending on what clients need. Same with the set-up; the online service can handle it all, or the client can handle it all or or there can be a mix of both parties taking care of it.

Clients are not responsible for maintaining tax tables or updating software when using an online payroll provider. Electronic services, such as direct deposit, electronic tax payments, and electronic tax returns, are available. It is not necessary to find an online payroll provider in close proximity to your business, since you can both access the same data through the Internet.

This is a good solution for those who are already comfortable with the concept of online banking. Payroll data is stored on secure servers, and transmitted with a high degree of encryption, so it is very safe.

Regardless of how this solution is customized, this option is most likely the least expensive of the three options.

Final Thoughts

Take some time to shop around and compare payment solutions. You will be better able to make the right choice if you carefully consider the time, money, and personel you can devote to payroll tasks.