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Which Is Better: In-House Payroll or Outsourcing Payroll?

Outsourcing Payroll

Payroll is is the compensation paid to a company’s employees. It is one of the vital process to be carried out within the finance department or the HR department. Following a proper payroll process protects the business from breaking local, state, and federal regulations while also maintaining the satisfaction of its employees. Payroll offers two options: outsourcing payroll and in-house payroll. Businesses are now divided on whether it is better to handle payroll internally or outside. The fact is that both in-house payroll and outsourcing payroll services have pros and cons. Moreover, payroll choice for the business depends on the team’s needs and preferences. Therefore, businesses should weigh the advantages and disadvantages of both internal payroll management and external payroll services to decide which is ideal for them.

Outsourcing Payroll

What is In-House Payroll?

When an organization processes its payroll internally, this is known as in-house payroll. Employees within an organization, typically in the finance or HR departments, manage in-house payroll. They utilize software accessible to the employees, and the system contains all the data about the employees. The payroll team is responsible for all computations, data entry, and payment-related tasks. Their responsibilities also include the following:

  • Making payments and providing pay advice.
  • Filing returns with other organizations, including HMRC.
  • Pension providers.
  • Courts.

Pros of an In-House Payroll

More control and oversight over the payroll process

An internal payroll system gives businesses fine control over payroll administration and processing. An internal payroll clerk can modify the current processes or assist in creating a payroll system that adheres to the preferences of the particular business. Instead, if a firm decides to use an outsource payroll provider, it may need to modify its procedures to fit its standard workflow. Internal payroll also enables making last-minute adjustments or fixing problems, which can be more effective than contacting a payroll service.

Avoid having to learn new integrations and software

Most payroll services demand that businesses convert to their payroll software, which requires training. However, having in-house payroll enables businesses to stick with their standard business platforms and tools.

Data protection

The risk of having employee data breached is automatically reduced by in-house payroll since it does not require a third party. The security risk decreases as data passes through a small number of persons or systems.

Cons of an In-House Payroll

Compliance challenges

In-house payroll departments deal with many private data and employee information, such as bank account information, birthdates, and Social Security numbers. Therefore, accuracy and compliance are crucial when processing the payroll internally. Hiring someone new to or still learning compliance regulations might cause issues with the company’s finances and employee engagement.


Many firms believe that in-house payroll is less expensive than outsourcing payroll. But the truth is in-house payroll entails expenses, including paying salaries or hourly wages to bookkeepers or HR teams, purchasing software, and paying for the employee’s time and labor. However, adopting outsourcing payroll services can help organizations save money on these expenses.

Unable to fully integrate business solutions

Due to its interdependence with many other HR processes, including employee scheduling, time tracking, and health benefits, payroll may take a lot of work. A significant drawback for in-house payroll may be the difficulty configuring these systems.

What is Outsourcing Payroll?

Outsourcing Payroll refers to the decision a firm makes to contract with a different organization or individual employee to handle payroll. Several reputable payroll outsourcing organizations offer beneficial services to businesses. The solutions these companies offer might range from an essential service to taking on activities like coordinating with HMRC, ensuring compliance with employment and payroll laws, and providing the complete payroll service. Most outsourcing payroll assist businesses in automating the payroll procedure, reducing the hassle and time associated with administering it daily.

Pros of Outsourcing Payroll

Easy setup

Since software programs and payroll businesses are already created to follow payroll procedures, outsourcing payroll system is simple to set up. Therefore, organizations are only needed to provide their information to set up.

Streamlined integrations

Outsourcing payroll services provide many practical integrations that help businesses handle several duties in one location. It also helps to save a ton of time in the long term by streamlining associated activities like payroll, accounting, HR, and onboarding.


Outsourcing payroll solutions include access to a support team or allocating specific individuals to the organization’s account. So businesses receive professional assistance to fix problems with payroll processing when they arise.

Cons of Outsourcing Payroll

Expensive packages

Each provider of outsourcing payroll services offers several pricing options. There is often a base-level subscription available for payroll services and higher-level subscriptions with more advanced capabilities. Therefore, it could be more expensive for organizations looking for a more straightforward payroll procedure.

Risk of a security breach

Payroll processing through outsourcing payroll requires access to a certain amount of private data. This includes details about employee bank accounts and schedules. Sending these data to a third-party provider may raise the risk of a security breach.

Less control over the payroll process

Businesses must be made aware of what is occurring throughout the outsourced payroll process. If they need something clarified, they must contact customer support and wait for a response. Furthermore, to complete payroll, organizations must provide business and employee data to outsource payroll services.


Outsourcing payroll and in-house payroll both have their advantages and disadvantages. Companies who wish to keep greater control over the process and have employees handle payroll should utilize in-house payroll. On the other hand, companies concerned about the difficulties and regulations involved in handling payroll independently and wishing to depend on a provider’s competence to execute it correctly might consider outsourcing. Choosing to opt for payroll services under Staffing Solutions, enables businesses to meet their payroll requirements by outsourcing it.