What Are Payroll Services?

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By Zara Chechi | Published: October 25 2021

Payroll services offer an affordable and simple way to pay your employees, file taxes, and carry out a bunch of other processes integral to your business.

What Do Payroll Services Do?

A payroll service provider can:

  • Automatically process payroll calculations
  • Process tax statements such as payroll and end-of-year taxes
  • Pay employees correctly and on time
  • File deadlines
  • File taxes
  • Deal with deposits and withdrawals

Paying Your Employees 

Not paying your employees correctly and on time is a surefire way to be left with a disgruntled team. You might feel more comfortable dealing with payroll in-house because you consider it to be more cost effective, or you want to maintain control over the data or keep some information private. But human error can cause huge issues with payroll, especially if you don’t have the right knowledge or skill set, so choosing to outsource is your best bet at keeping your employees happy and your business running smoothly. 

Paying Your Taxes

As well as your employees, federal, state and local tax collection agencies also have to be paid on time. Late or missed payments can lead to financial penalties. In fact, the Internal Revenue Services (IRS) revealed that one out of three employers has been charged for making payroll mistakes. In total, the penalty fees add up to billions. Due to the ever-changing nature of tax regulations, payroll mistakes are easy to make. 

As an employer, you will need to do your due diligence and read up on the local rules and regulations around employment, payroll and tax in the state you’re headquartered in, as these vary between states. 

What you’re responsible for as an employer:

  • Voluntary payroll deductions, such as insurance premiums, retirement plan contributions, and job-related expenses
  • Paying and reporting payroll taxes 
  • Complying with FICA TAX (Federal Insurance Contributions Act)
  • Paying additional Medicare Tax for unmarried employees filing an individual tax return 

Your Options For Running Payroll:

In-House Payroll

If you only have a handful of employees and want to avoid paying for payroll software, you can choose to run payroll by hand. Although this is the most affordable option, it may turn out to be much more expensive than paying for software if you end up making a mistake leading to a monetary penalty. 

The margin for human error is wide with this option, plus you’ll have no support when it comes to filing your taxes. But if you’re confident you have a good understanding of tax legislation and employee law, then this method could work – just ensure that you’re meticulous and organized when it comes to the numbers. 

Top tip: Check to see if your state requires that you hand out payslips each time you pay your employees. 

Payroll Software

Payroll software is the middle ground between doing things yourself and outsourcing. Most payroll software is now cloud-based, so you can easily pay employees and share data with HR or your accountants. 

There are two options when it comes to payroll software:


With self-service payroll, you calculate and file your own payroll taxes. This software provides a bunch of benefits and features, such as easy access to tax forms and paycheck calculators. It can streamline your records by storing necessary information like bank details. Self-service providers usually provide a portal where employees can click in and out, check payslips and request time off. 


Full-service payroll software will calculate and file all taxes for your business – taking a huge weight off your back. If you do opt for full-service payroll, make sure it comes with a tax penalty guarantee. This means that if the payroll provider makes a mistake whilst filing your taxes, they’ll pay the fine and deal with the IRS. 


Payroll software is more suited to small or medium-sized businesses, since large businesses will need some more meat to process payroll correctly. This is where outsourcing payroll comes in. 

With outsourcing, you’ll have no involvement in the payroll process and instead leave it in the hands of the payroll provider. This is a time-saving and efficient way to deal with payroll – although it’s also the most expensive option. As your business grows, however, this is often the best choice as it leaves no room for human error and ensures your employees are well looked after and your taxes are in order. 


What Are The Benefits Of Outsourced Payroll Service Solutions?

Outsourcing payroll services streamlines your business by:

  • Saving time
  • Maximizing efficiency
  • Guaranteeing confidentiality and security 
  • Automatically adding changes in legislation
  • Allowing for customized reporting and services 
  • Eliminating the need for additional staff to deal with payroll and taxes 

How Much Will Payroll Services Cost Me?

The cost will depend on whether you choose payroll software or outsourcing, the size of your business, the number of employees you have, and various other factors. Pricing is much lower than you might think, with some providers offering services from $10 a month, plus $4 per person, per month. 

Are payroll services reliable?

With over 300,000 payroll and bookkeeping services in the US and an industry worth around $55.1bn in 2021, payroll services are an established sector relied upon by thousands of companies every day. 

It’s normal to be concerned about security and reliability, as these services will have access to your business’s private and sensitive data. That’s why it's important to carry out adequate research to find the right fit for you. Our free tool asks for some basic information such as whether you’ve used payroll services before, what kind of payroll services you’re looking for, and the size of your business. 

We’ll match you up with trusted and reliable suppliers who’ll reach out to you with no-obligation quotes. 

Do I need a minimum number of employees to use payroll services?

Your business can use and benefit from payroll services whether it has a handful of staff or thousands of employees. Small businesses might actually find it highly efficient to use payroll services, as it frees up staff to focus on other areas of the business. Most payroll services don’t require a minimum number of employees, but there could be a minimum service charge. 

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Zara Chechi

Zara is a law grad with a penchant for wordsmithing. As Expert Market’s CRM and payroll expert, she relishes researching and writing expert content. 

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