Payroll Service or Payroll Software – What is the Real Difference?

Every business needs to deal with payrolls. It is not an easy task, and it is definitely connected to a lot of problems. Keeping all the paperwork in order and then actually carrying the transactions is not an easy chore. This is why most of the businesses reach for the help of the payroll services from specialized agencies, while the other reach for the payroll software as the right solution for their payrolls.

Both approaches are rather good, but there is some significant difference between them. These differences are not to be ignored if you are keeping your businesses success in perspective, and it is definitely required to make a good assessment before you chose to go with either of the options. We will try to break down the difference using several parameters:


Reliability is definitely a parameter that is key for any service. In those terms, the difference is not a huge one. Payroll services are usually quite reliable, as long as you resort to hiring a reliable accountant. This is something that is pretty well known between the business owners, and the choice to be made is simple.

Payroll software is also an absolutely reliable solution. Since it has been tested and proven through years of development and exploitation, each such software is 100% reliable. It doesn’t take sick leaves, it knows no holidays, and the up-time is near to 100% with most of the providers. A good accountant or good payroll software, it is up to you to decide what is more reliable.


The only real problem with payrolls that can cause huge financial losses is related to the possible fines. This is where accountability for those mistakes kicks in.

Payroll services are being carried out by people. People are prone to making mistakes, even if they are the best in their business. These mistakes will reflect on your business, and you will have to pay for the fine.

Payroll software, on the other hand, can’t make any mistakes. It calculates all the fees and taxes automatically, and you will always get the right data, as long as you provide it the right feed. In these terms, payroll software is definitely a better solution.


Paying a lot for something is never a good thing if there is an option to avoid it. This is a part in which the two options differ a lot.

Payment services definitely lift all the work from your hands, but they also mean you will have to pay for the working hours spent on your case. It is definitely a more expensive option, and it is not an insignificant thing.

Payroll software comes with a fee that is not really comparable to the payroll service. Monthly fees are extremely low, and in most cases based on the number of employees. You do have to invest some working hours into it, but it is still far cheaper than the fully managed service. If you are a start-up or your business needs to make some budget cuts, this is the perfect way to do it.

Internal control

When you outsource your payrolls, taxes, and other accounting elements to a third party, you pretty much lose any control over it. This can be both a blessing and a curse, especially if something gets complicated.

Payroll software, on the other hand, gives you the ability to control every single aspect of your accounting and to make changes any way you need. It shortens the response times and saves you quite a lot of hassle.


Accessing your payroll data is important both for you as the business owner and your employees and contractors. When you outsource, the only data feed you will get is in direct communication with the agency you hired, and for the workers and employees, it is their paycheck slip.

When you opt for payroll software, then things get much easier and better. Both you and your employees can access the database, with the employees having access only to their own data. This eliminates any need for communicating these data and saves you a lot of time.

All in all, if you are looking for an efficient, reliable, and low-cost solution, payroll software should be your choice. It checks every point needed and gives you full control over your accounting.