Pros and Cons of Payroll Services

an organizational binder labeled payroll

Business owners are always searching for effective methods to enhance the company performance. Using a specialized payroll service has both advantages and disadvantages you should consider before making a decision.


  • Accurate Payroll Processing
    Outsourcing the company payroll can save larger companies money. Owners of businesses that have a large number of employees realize that using a service provides accurate payroll processing. These services also know all the latest updates in tax laws. Since both state and federal tax laws change often, many businesses outsource to a reputable payroll service.
  • Saves Time and Money
    Eliminating the company payroll manager position and outsourcing to a payroll service can be a major advantage to businesses. Generally, it will cost more to hire an employee to do the job in-house than outsourcing the work to a payroll service.
  • Convenience and Functionality
    Businesses simply need to call or fax in the hours, deductions and salary amounts to a payroll service. They also handle retirement plans and manage direct deposits to employee bank accounts.


  • Employee Personal Information
    By no means does using a payroll service guarantee security for your employees’ personal information, including social security numbers. Though it seldom occurs, there is a risk of personal information being leaked or illegally obtained through a payroll service. Employee confidentiality risk is another important concern when weighing the options of outsourcing company payrolls.
  • Incorrect Data
    Sometimes mistakes can happen, and it often occurs with payroll services. Improperly reported work hours can result in a pay decrease or an incorrect tax deduction might accidently increase tax withholding. These problems can make it difficult to correct the problem with accurate information. Usually problems like these are corrected in an efficient manner, but it can take as long as another pay period before the mistake is resolved.
  • It Can Become Costly
    Payroll Services charge for each check, plus a fee for every direct deposit made into personal banking accounts and there is typically a charge for filing W-2s. For the small-business owner, it is might be a better idea save money by doing the payroll accounts in-house.

As an employer and business owner, it is your responsibility to determine whether outsourcing the company payroll to a payroll service is in the best interest of the company. Using a payroll service can have many positive effects on your business’s productivity and efficiency, but can also be costly.