Payroll Software or Payroll Outsourcing Services? What should you select?


Nishit Jariwala

Senior editor

Parul Saxena

Chief editor

Last updated: May 2, 2021


HRMantra : No. 1 In Payroll Software

Payroll software is an important aspect of human resources, especially in a large firm wherein there are many employees. With the computerization of most departments, it only makes sense to use technology to efficiently manage payroll as well.

Growing companies planning to expand its employee base need a professional HR Payroll software like SumHR, Nitso Payroll, JSM Payroll, EazePay.

Looking for Payroll Software? Check out SoftwareSuggest’s list of the best Payroll Software solutions.

Payroll software automates the process of paying salaries to employees and streamlines it by reducing the paperwork for the accounting department. The software also ensures accuracy in computing numbers and eliminates financial errors. Some HR managers have happily made the shift to payroll software system, but still, there are some who would argue that payroll outsourcing services is a better option. Payroll outsourcing service is the process of giving the entire job of payroll to an external agency whereby you save on staffing costs and receive peace of mind.

Choosing between deploying a payroll software for internal use and outsourcing the whole process to an external company is a difficult decision. Both these alternatives are mutually exclusive and need thorough research. This is a high impact decision and cannot be made without considering the pros and cons of both these options. Moreover, one cannot rely on the experiences of some other company or professional as the nature, industry and processes of every company is different. What works for one company, may or may not work for some other company and how a robust payroll software can help you to save money.Payroll Software vs outsourcing

There is no clear winner between the two options. It really depends on what exactly is your requirement and which of these two options fulfills all your needs. To decide upon which option is best for your situation, there are a few key points to consider:

1. Firm’s budget

Both these alternatives come with their own set of costs. Buying a payroll software requires investments in the software as well as on maintenance and training. While outsourcing, the foremost savings are in the form of staffing costs. You do pay for the outsourcing service, but against this you can save on time required to train staff. You also need to consider the salaries paid to the employees to operate the software. Paying an outsourcing agency means a recurring monthly cost, which may eventually exceed the cost of buying a payroll software.

Therefore, depending upon your budget, you may decide to accept one-time cost of buying the software or you may decide to pay each month to an outsourcing agency.

2. Integration Factor

A major consideration for most firms is the ability to integrate payroll with other business processes. The idea is to reduce the number of different systems deployed by the firm and access an integrated system instead. Integrating payroll with other HR functions such as rostering, time and attendance can reduce inefficiencies and make administration robust! A firm can either choose to integrate these functions in-house and simply outsource it to a firm which offers an all-inclusive HR integrated software.

3. Data management

A payroll software can store all data from an employee’s joining details to his or her retirement. Historical data of payrolls is essential for an HR manager. How conveniently are these details available when needed is the real question which helps answer the question of in-house software or outsourcing? If you outsource payrolls, you may have to wait for a few hours or business days to obtain the required data. On the other hand, in-house software would mean that you will have the data when you need it without going through the trouble of calling a representative to email you the details. Exporting data from payroll software is really easy and can help HR managers make quicker decisions.

4. Training Employees

If you already have employees who are handling payrolls, you need to consider how fast they can learn using the payroll software. Processing payroll requires complicated calculations such as base pay, annuities, taxation, health deductions, hourly rates, overtime, weekend pay rates, paid leaves, unpaid leaves etc. Understanding all these functions on payroll software can be time-consuming. Moreover, every time a trained employee quits the company, you will need to invest in training a new employee. Furthermore, employees also need to consider the possibility of updates in the software, which may require additional training over a period of time.

Also, if you do not have anyone who can take the responsibility of payrolls on a software, then it is an obvious choice to outsource. Instead of spending resources on training, outsourcing becomes a smarter choice.

5.  Risk Factor

Though every business would like to keep risk to a minimum, every business has a different level of risk tolerance. This appetite to accept different levels of risk can help you determine whether to outsource or go with an in-house system. When opting for in-house software, there is always a risk of the computer crashing and data loss in case of installation based software. You may not have the resources to maintain an off-site backup of your data. This can be eliminated by either outsourcing it to a company that has the data protection facility or moving on to SAAS based software like sumHR which can provide data protection.

Having considered data loss, on the other hand, we also need to look into data theft which is possible when outsourcing. Moreover, if you feel that your payroll data is sensitive, then you may not be comfortable sharing it with an outsourcing company. Here are the things you should know before purchasing payroll software

When making a decision with regards to payroll, carefully consider the above mentioned factors. After evaluating the pros and cons of both these options in relation to your own firm and needs, you will be able to make the right decision for yourself OR you can connect with Payroll software analyst at to get right recommendations on your software selection.

software or outsourcing

Blogger, entrepreneur, designer, photographer and a dreamer are just a few words to describe Nishit - an engineer by chance and an entrepreneur by choice. Entrepreneurship is not a career decision for him, it is a lifestyle choice he made when he was only 17.

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