Full-Service Payroll vs in-house

Always wondered what the big difference is between full-service payroll vs in-house is?

Well, one of the most significant differences is that In-house processing is as easy as DIY. DIY, unless you’re a jack-of-all-trades or an expert, usually isn’t that simple. In full-service mode, all payroll processing, direct deposit, and printing of checks, as well as tax payments and filing, are outsourced to a third-party provider.

So, is one method better than the other, or do they ultimately prove to be the same? There are differences in the approach, and, of course, perks to both. You should conduct thorough research and assess your skills, resources, and goals carefully before making a decision.

Read on to discover the benefits of each system and identify the proper selection for your company or CPA firm.

The perks of in-house processing

When first-time business professionals think of payroll processing, they often picture the accountant in the back corner of the office crunching away at the numbers.

Of course, just like there are benefits to outsourcing, there are also many pluses to in-house processing. There are several factors to consider before outsourcing from the outset.

For example, if you already work in an industry that requires hiring a team of accountants or HR personnel, then in-house processing is potentially the best option. This is because payroll can be tacked on as an additional function of that position. That’s especially the case if you already have someone on your team who’s skilled in payroll processing.

Another benefit to in-house processing is that it’s easily customizable. Since both the processing software and the servers are physically located in your office, you can quickly make adjustments to employee information. And to promptly correct any errors.

Additionally, there is a common belief that storing employee data on in-house servers is more secure than entrusting it to the cloud.

Until very recently, that was indeed the case.

However, things are slowly changing now.

Many payroll firms store their data on cloud servers provided by Google Cloud and Amazon AWS. These services are less likely to be the target of cyberattacks and are less likely to be compromised altogether.

The flipside:

Of course, there’s also a downside to in-house processing that can make it highly inconvenient for some employers and even some CPA firms.

The most common problem that many employers experience with in-house payroll is that mistakes are more frequent.

Part of the problem is that, as an employer or business owner, you have to hire an expert—someone who happens to be a highly skilled professional or trains someone to do the work.

If you train someone, you’re bound to go through a process of trial and error. It doesn’t matter how in-depth your training program is. And you may not be that knowledgeable in payroll and HR either. So the person you are training gets limited knowledge.

Even more importantly, it is crucial to remember that even the most skilled payroll processors can make mistakes.

What’s more, in-house payroll tends to be more expensive—especially for smaller companies.

Think about it. Not only do you have to pay a base rate for the in-house software, but you also have to pay a per check/ per employee fee. That’s not to mention the salary you pay that employee as well.

However, one of the key factors to consider before outsourcing is that there is a tipping point. The larger your company gets, the more likely it is that outsourcing can become the more expensive option.

But perhaps one of the least apparent problems associated with the in-house method is data storage. If you are storing sensitive information on in-house servers, it can take up a lot of physical space in your office.

Why you should switch to full-service payroll

One of the advantages of outsourcing is that you don’t just get one or two professionals working on your company’s payroll. You get a whole team of experts, which makes mistakes an infrequent occurrence.

Comparatively, full service tends to be less expensive in the long run because you’re not paying an additional salary.

One of the many advantages of outsourcing is that it saves you all that space for something else.

Even more importantly, outsourcing saves you a boatload of time that you can also allocate towards growing your business.

Is full-service the right approach for your company? Well, among the main factors to consider before outsourcing are the price point and the size of your company. If you’re a small business owner, it probably just makes more sense to outsource.

Additionally, if you’d like to avoid the hassle of dealing with mistakes regularly, or not, worse still, you could end up getting fined for significant errors due to a lack of compliance with tax payments and filing. In such a case, outsourcing is the route you want to take.

Conclusion:

It’s crucial that you find a system that works best for you, whether it be in-house processing or outsourcing. An analysis of Full Service Payroll vs In-House is essential before making your decision.

If you choose to go with full-service payroll, however, there are a few factors to consider before outsourcing. Consider whether the switch brings an additional level of convenience to your business.

In many cases, in-house processing cannot provide the same level of convenience at the same scale. This is because it requires employers to constantly monitor the process and ensure that the final product is error-free.

If you think that sort of effort is better spent somewhere else in your business, then full-service is probably the right option for you.