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June 20, 2017

What’s the difference between Full Service Payroll vs In-House?

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 biggest difference is that In-house processing is as easy as DIY. DYI, unless you’re a jack-of-all-trades or an expert, usually isn’t that simple. In full service, all payroll processing, direct deposit and printing of checks, tax payments and tax filing is outsourced to a third party.

So, is either method better than the other or do they play out to be the same? Well, there are differences in the approach, and of course perks to both. You should do your research and take a good audit of your skills, resources and goals before making your decision.

Read on to discover the benefits of each system and identify which is the right selection of 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 a few factors to consider before outsourcing from the get-go.

For example, if you already work in an industry that requires you to hire 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 just as quickly correct any errors.

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

And up until very recently, that was very much the case.

But now, things are slowly changing.

A lot of payroll firms store their data on cloud servers provided by Google Cloud and Amazon AWS. These services are actually less likely to be the target of cyber hacks and less likely to be compromised all together.

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 simply more frequent.

Part of the problem is that, as an employer or business owner, you have to hire and expert. Someone who happens to be a highly skilled professional or train 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. And you may not be that knowledgeable in payroll and HR either. So the person you are training gets limited knowledge.

Even more importantly, the key thing to keep in mind is that even the most skilled payroll processers 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 some sort of a base rate for the in-house software. 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 can take 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.

Which is one of the many advantages of outsourcing: 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 way to go for your company? Well among the main factors to consider before outsourcing are 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 on a regular basis or not. Worse still, you could end up getting fined for a major errors for lack of compliance on taxes payments and filing. In such a case, outsourcing is definitely the route you want to take.


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 or not.

In many cases, in-house processing cannot provide the same kind 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.

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Felix Mwania

I live in the intersection of technology and entrepreneurship. I am a technology enthusiast but my passion is helping small businesses succeed, including mine.

When I am not working, you will find me goofing with my wife and kids. When not with family and/or friends, you will find me doing some home improvement projects.

Felix Mwania


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