Online Payroll Services: Why More and More Companies Turn to Them

December 4, 2018

Payroll has come a long way since the days when companies relied on time clocks and punch cards, but the payroll process is still laborious. Because of this, companies have been built on making the payroll process easier.

First, there were ERPs like PeopleSoft and SAP that required a significant outlay of time and cash to update and streamline payroll. While these solutions were great, they weren’t very practical for smaller companies. In addition to money, ERPs required a lot of time and equipment, which took them off the table for companies with fewer than 1,000 employees.

Once cloud computing was developed and companies could use cutting-edge software under the SAAS model, payroll solutions became scalable and were finally within the grasp of smaller companies. Modern payroll technology was no longer limited to Fortune 500 companies.

Given that payroll can now be completed in-house with up-to-date technology, why are more companies now using online payroll services?


Even though SAAS has made it possible for companies to access up-to-date technology without breaking the bank, cost is still the number one reason companies give for using online payroll services. This makes sense when you realize that one of the biggest costs of business administration is headcount. When you outsource payroll, you are better able to manage your team by moving people out of the outsourced payroll administration functions and into other areas that need attention. This can help your company reduce turnover, which helps control staffing costs.

Online payroll services reduce or eliminate costs related to software licensing, equipment purchases, and government fines. This last one is especially important now because labor laws are changing faster than ever. Your company is responsible for complying with these changes whether your department understands them or not. Companies that don’t comply often end up with sizeable fines and fees. Using an online payroll service can eliminate those unnecessary charges.

Decreased Errors

One of the most common reasons companies are choosing to use online payroll services is to minimize the potential for errors. A payroll service can easily add more specialists to your pay cycle during crunch time (such as when bonuses are paid). A service like this can also provide extra oversight when employees change their withholdings (such as after payroll reviews or open enrollment). A payroll service can also handle calls from associates who have questions about taxes or involuntary deductions (such as garnishment).

These questions come up often. Having a payroll professional ready to answer them can give your employees an extra sense of confidence.

More Efficient Reporting

Requests for payroll information are very common. Payroll confirmation may be requested by many entities, both private and public. Many of these requests are time-sensitive (such as those that come from the Social Security Administration or by mortgage companies), but all requests must be handled appropriately and quickly.

Many payroll departments have an employee (or even a small team of employees) dedicated to completing payroll confirmations. Using an online payroll service will help free your staff from necessary but tedious tasks such as responding to these requests. As a plus, you won’t have to pay fines or deal with the fallout from inconvenienced requestors or employees.

Speed and Flexibility

Anyone who has ever been around payroll knows that changes come up to the last minute – and after! A manager may suddenly remember that the two personal days Jane took last week were actually for jury duty. A supervisor may realize that she didn’t put any sick time in for Tom while he was out for medical leave.

When it comes to emergencies, a company can handle them by the book or they can bend over backwards to make the accommodation. Both approaches have their benefits and drawbacks. You want your people to be happy, but you don’t want to risk delaying payroll or giving the impression that the payroll deadline is flexible.

With an online payroll service, you can get last minute changes dealt with quickly in emergency situations. If necessary, you have a solid backup for when those exceptions simply can’t be handled.

When it comes to flexibility, an online payroll service can be your best friend. When you have business units that are paid differently – such as people on commission or who are actually 1099 contractors rather than W-2 employees – using an online payroll service can provide a greater level of flexibility and expertise than most in-house teams.

Less Drama

Outside of open enrollment, the pay run is easily one of the most stressful HR functions. It’s also the most sensitive. In fact, payroll reliability – or lack thereof – is often cited as the reason why people leave a company. Of all the benefits that come with using online payroll services, one of the best is eliminating the potential for drama. Once your employees don’t have to worry about payroll, they can better concentrate on building the business.

For more information on how Commonwealth Payroll & HR can work with you on your strategic human resources planning, call us today at 877-245-1159.

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