Hiring a Payroll Provider vs. Using Payroll Software vs. Doing Payroll by Hand

Whether you’ve been in business for a long time, or are just starting out, you know that payroll is an essential part of running your company. Along the way, you may consider switching your payroll practices – possibly investing in payroll software or a third-party payroll service. Or, you may choose to complete all payroll by hand. In this article, we will break down the major differences between the three methods of calculating payroll.

Hiring a Payroll Provider

A payroll provider will take care of calculating employees’ gross pay, tax withholdings, and net pay. If employees do not choose to use direct deposit, a payroll provider will also print paychecks for a company. In addition, a payroll provider will ensure that the correct taxes are being withheld from both the employee and the employer for federal, state, and local governments. This is especially important in states with complicated local taxes, including Michigan, Pennsylvania, and Ohio. Hiring a payroll provider will gain a business the most extensive support. However, it is also the most costly option.

Using Payroll Software

Using payroll software can be a great solution for a small company in a state with “easy” taxes. The user simply enters time worked into the program, and taxes are calculated automatically. Then, paychecks can be easily printed or direct deposit set up. The payroll software generally does not pay taxes for the business, but will remind the user when to make payments. A business owner can also hire an accountant to complete payments. This option is a middle of the road expense, and a business owner should carefully evaluate how long they are spending on payroll versus the cost of payroll software before investing in a program.

Doing Payroll by Hand

Doing payroll by hand requires a business owner to complete payroll manually – including entering hours, tracking time worked, calculating taxes, paying the government, and printing paychecks or completing direct deposit. The business owner will fill out all forms manually, and is responsible for withholding the correct employee taxes, which can be a huge burden if employees work in multiple states, or work in a state with complicated local taxes.Did you enjoy this article? Visit insights to stay up-to-date on all payroll-related news!